the economics of money, banking, and financial markets

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17. 
    

    If the particular channels through which changes in the money supply affect aggregate
    income are diverse and continually changing, the best evidence of monetary policy's effect is
    likely to come from ____.
    A) reduced-form models
    B) structural models
    C) median-voter models
    D) indirect models
    Answer: A
    Diff: 2 Type: MC Page Ref: 27.1A- 4
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence

    
    


18. 
    

    Monetarists' preference for reduced-form models is based on their belief that ____.
    A) reverse causation is a problem
    B) structural models may understate money's effect on economic activity
    C) money supply changes are always endogenous
    D) monetary policy affects only investment spending
    Answer: B
    Diff: 2 Type: MC Page Ref: 27.1A- 4
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence

    
    


19. 
    

    When Keynesians argue that "correlation does not necessarily imply causation," they are
    probably criticizing ____.
    A) structural-model evidence
    B) reduced-form evidence
    C) indirect-model evidence
    D) black-box evidence
    Answer: B
    Diff: 2 Type: MC Page Ref: 27.1A- 4
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence

    
    


20. 
    

    A basic principle in economics is that correlation ____ imply ____.
    A) does not necessarily; causation
    B) does; causation
    C) does not necessarily; independence
    D) Both A and C
    Answer: D
    Diff: 3 Type: MC Page Ref: 27.1A- 4
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence