the economics of money, banking, and financial markets

(Sean Pound) #1
795 "
© 2014 Pearson Canada Inc."



  1. "How do we prevent the inflationary fire from igniting again and stop the roller coaster ride in
    the inflation rate of the last 40 years?" Milton Friedman's famous proposition suggests the simple
    solution: ____.
    A) reduce the number of terms that politicians are allowed to serve
    B) reduce the growth rate of the money supply
    C) reduce the marginal tax rate on low-income wage earners
    D) increase the marginal tax rates on businesses that hike prices in excess of 5 percent per year
    Answer: B
    Diff: 2 Type: MC Page Ref: 612
    Skill: Applied
    Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
    everywhere a monetary phenomenon"




  2. Milton Friedman's proposition concerning the cause of inflation implies a simple solution to
    the inflation problem: ____.
    A) reduce government budget deficits
    B) limit the ability of fiscal policymakers to bring pressure to bear on the monetary authority
    C) limit the number of terms that politicians are allowed to serve
    D) reduce the growth rate of the money supply
    Answer: D
    Diff: 2 Type: MC Page Ref: 612
    Skill: Applied
    Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
    everywhere a monetary phenomenon"




  3. Milton Friedman's proposition that inflation is always and everywhere a monetary
    phenomenon holds only if ____.
    A) government budget deficits do not rise continually
    B) the unemployment rate does not rise continually
    C) the inflation rate rises continually
    D) Canada does not experience more than one negative supply shock per decade
    Answer: C
    Diff: 2 Type: MC Page Ref: 612
    Skill: Recall
    Objective List: 26.3 Explain Milton Friedman's famous proposition that "inflation is always and
    everywhere a monetary phenomenon"



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