the economics of money, banking, and financial markets

816 "

© 2014 Pearson Canada Inc."

61. 
    

    As a result of recent empirical research, there has been a convergence of Keynesian and
    monetarist opinion to the view that ____.
    A) money is all that matters
    B) money does matter
    C) money does not matter
    D) fiscal policy is all that matters
    Answer: B
    Diff: 2 Type: MC Page Ref: 649
    Skill: Recall
    Objective List: 25.1 Express the different types of empirical evidence

    
    


62. 
    

    Real business cycle theorists are critical of monetarist reduced-form evidence because they
    believe ____.
    A) money is the most important cause of changes in aggregate demand
    B) there is reverse causation from the business cycle to money
    C) there is reverse causation from money to the business cycle
    D) business cycles do not exist
    Answer: B
    Diff: 2 Type: MC Page Ref: 649
    Skill: Recall
    Objective List: 25.1 Express the different types of empirical evidence

    
    


63. 
    

    Real business cycle theory states that the most important cause of business cycles is
    ____.
    A) shocks to the money supply
    B) interest rate shocks
    C) Bank of Canada policy decisions
    D) shocks to tastes and technology
    Answer: D
    Diff: 2 Type: MC Page Ref: 649
    Skill: Recall
    Objective List: 25.1 Express the different types of empirical evidence

    
    


64. 
    

    Explain what we call structural model evidence in describing the transmission mechanism of
    monetary policy.
    Answer: When we build a structural model to examine the evidence on the effect of changes in
    the money supply on economic activity, we are using a collection of equations that describe the
    behaviour of firms and consumers in many sectors of the economy. These equations then show
    the channels through which monetary and fiscal policy affect aggregate output and spending. A
    structural model might have behavioural equations that describe the working of monetary policy
    through many variables. Structural model evidence on the relationship between M and Y looks at
    empirical evidence on the specific channels of monetary influence, such as the link between
    interest rates and investment spending.
    Diff: 3 Type: SA Page Ref: 639
    Skill: Recall
    Objective List: 25.1 Express the different types of empirical evidence