the economics of money, banking, and financial markets

(Sean Pound) #1
797 "
© 2014 Pearson Canada Inc."



  1. If policymakers set a target for unemployment that is too low because it is less than the natural
    rate of unemployment, this can set the stage for a higher rate of money growth and ____.
    A) cost-push inflation
    B) demand-pull inflation
    C) cost-pull inflation
    D) demand-push inflation
    Answer: B
    Diff: 2 Type: MC Page Ref: 614 - 615
    Skill: Recall
    Objective List: 25.3 Describe whether monetary policy should be activist or passive




  2. Theoretically, one can distinguish a demand-pull inflation from a cost-push inflation by
    comparing ____.
    A) how fast prices rise relative to wages
    B) the unemployment rate with its natural rate level
    C) when prices rise relative to wages
    D) government debt to real GDP
    Answer: B
    Diff: 2 Type: MC Page Ref: 614 - 615
    Skill: Recall
    Objective List: 25.3 Describe whether monetary policy should be activist or passive




  3. Demand-pull inflation can result when ____.
    A) policymakers set an unemployment target that is too high
    B) a persistent budget deficit is financed by selling bonds to the public
    C) a persistent budget deficit is financed by selling bonds to the central bank
    D) workers get numerous wage increases
    Answer: C
    Diff: 2 Type: MC Page Ref: 614 - 615
    Skill: Recall
    Objective List: 25.3 Describe whether monetary policy should be activist or passive




  4. Which of the following is least likely to lead to inflationary monetary policy?
    A) Rising unemployment
    B) Expanding federal budget deficits
    C) Declining oil prices
    D) Conflict in the Middle East
    Answer: C
    Diff: 2 Type: MC Page Ref: 614 - 615
    Skill: Applied
    Objective List: 25.3 Describe whether monetary policy should be activist or passive



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