the economics of money, banking, and financial markets

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21. 
    

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

    
    


22. 
    

    Reverse causation between money and aggregate output is likely to be a problem when a
    central bank targets ____.
    A) a monetary aggregate
    B) an interest rate
    C) the exchange rate
    D) the inflation rate
    Answer: B
    Diff: 2 Type: MC Page Ref: 641
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence

    
    


23. 
    

    The reduced form approach ____ the way monetary policy affects the economy and
    may be ____ likely to spot the full effect of changes in M on Y.
    A) does not restrict; more
    B) restricts; more
    C) does not restrict; less
    D) restricts; less
    Answer: A
    Diff: 3 Type: MC Page Ref: 27.1A- 2
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence

    
    


24. 
    

    A disadvantage of ____ evidence is that it cannot rule out ____.
    A) reduced-form, reverse causation
    B) reduced-form; adverse selection
    C) structural model; reverse causation
    D) structural model; adverse selection
    Answer: A
    Diff: 3 Type: MC Page Ref: 27.1A- 3
    Skill: Recall
    Objective List: Appendix: Evaluating Empirical Evidence