SOLVED

4) According to monetarists, such as Milton Friedman ________. A) the central bank should have discretionary authority to respond to economic problems that develop over the course of the business cycle. B) the Taylor rule should effectively address the problem of inflation. C) an increase in government spending has substantially the same effects as an unanticipated increase in the money supply on domestic interest rates. D) the money supply should grow at a constant rate regardless of the state of the economy. 5) The notion that the central bank should set its federal funds target by a formula that puts weight on both output and inflation gaps is known as ________. A) the Taylor rule. B) the constant growth rate rule for money. C) the equation of exchange. D) the Lucas rule. 6) According to the Taylor rule ________. A) expectations are formed in an adaptive fashion. B) the central bank should set its federal funds rate target by a formula that puts weight on both output and inflation gaps. C) a constant growth rate rule for money should be adopted. D) expectations should be formed consistent with the model of rational expectations. 7) For monetarists, the sole source of fluctuations in aggregate demand is ________. A) government spending and tax rates. B) the velocity of money. C) the supply of money. D) international trade variables, i.e. exports and imports. 8) The constant growth rate rule for money, as initially proposed by Milton Friedman, has been adjusted ________. A) to take the problem of moral hazard in account. B) to account for the role played by adaptive expectations in policy formation. C) for the difference between real and nominal economic variables. D) to allow for possible short-run movements in velocity. 9) According to monetarist theory, responsibility for the Great Depression lays with ________. A) the Federal Reserve System. B) the liberal rulings of the Supreme Court. C) the President and Congress of the United States. D) unfair trade practices. 10) The Swiss National Bank established the practice of targeting monetary aggregates in________. A) 1929. B) 1975. C) 2001. D) 2008. 11) The political business cycle involves the ________. A) expenditure of substantial funds by industry lobbyists to manipulate government regulation. B) movement of individuals from government employment to positions within the industry they had previously participated in regulating. C) use of expansionary fiscal policy just prior to elections. D) election of government officials who are supportive of the government sector. 12) An example of the political business cycle in action came during the ________. A) Roosevelt administration of the 1920s. B) Nixon administration of the 1970s. C) Reagan administration of the 1980s. D) Bush administration of the 2000s. 13) The use of expansionary fiscal and monetary policy just prior to elections is known as the ________. A) electoral college. B) time-inconsistency problem. C) Watergate scandal. D) political business cycle.