Question 1

Early Keynesians believed that ________ interest rates during the Great Depression indicated that monetary policy was ________.

Accepted Answer

Early Keynesians believed that low interest rates during the Great Depression indicated that monetary policy was too tight. They believed that the low interest rates were a result of a lack of demand for credit, rather than an indication of easy monetary policy. This led them to argue for more active government intervention to stimulate demand and promote economic growth.

Question 2

Friedman and Schwartz found that the rate of money growth fell prior to business cycle downturns in

Accepted Answer

The answer of Friedman and Schwartz found that the rate...

Question 3

By the standard of low-grade bonds,interest rates were ________ and monetary policy was ________ during the Great Depression.

Accepted Answer

By the standard of low-grade bonds, interest rates were high during the Great Depression, as investors were hesitant to purchase risky investments. Additionally, monetary policy was tight, as the Federal Reserve was focused on maintaining the gold standard and keeping inflation in check, rather than stimulating economic growth through easier monetary policies.

Question 4

In response to the early Keynesians,monetarists contended that

Accepted Answer

The answer of In response to the early Keynesians,monetarists contended...

Question 5

Movements of real interest rates indicate that,contrary to the early Keynesians' beliefs,________ policy was ________ during the Great Depression.

Accepted Answer

Movements of real interest rates show the stance of monetary policy. A tight monetary policy would result in high real interest rates, while an easy monetary policy would result in low real interest rates. Therefore, the movements of real interest rates during the Great Depression indicate that monetary policy was tight, not easy. This rules out choices B and D. The early Keynesians emphasized the importance of fiscal policy in stimulating aggregate demand, so choice A can also be ruled out.

Question 6

Early Keynesians believed that ________ interest rates during the Great Depression indicated that monetary policy had been ________.

Accepted Answer

The answer of Early Keynesians believed that ________ interest rates...

Question 7

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,

Accepted Answer

Friedman and Schwartz found that a decrease in the growth rate of the money supply preceded a decrease in output in every business cycle they analyzed. This supports the idea that changes in the money supply can have a significant impact on the overall economy.

Question 8

During the Great Depression,real interest rates

Accepted Answer

The answer of During the Great Depression,real interest rates
...

Question 9

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the ________ decreased before ________ decreased.

Accepted Answer

The study found that the growth rate of the money supply decreased before the output decreased in every business cycle studied over nearly a hundred-year period. This is known as the monetary theory of the business cycle, which suggests that changes in the money supply can affect the overall level of economic activity.

Question 10

Early Keynesians felt that ________ policy was ________,so they stressed the importance of ________ policy.

Accepted Answer

Early Keynesians believed monetary policy was ineffective in combating recessions, so they emphasized the importance of fiscal policy (government spending and taxation) to manage economic activity.

Question 11

Because ________ evidence is of a ________ nature,there is always the possibility of reverse causation,in which output growth causes money growth.

Accepted Answer

Timing evidence is of a reduced-form nature, which means it shows correlations without establishing causality, allowing for the possibility of reverse causation.

Question 12

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in ________ and ________.

Accepted Answer

The answer of Early Keynesians concluded that changes in monetary...

Question 13

Early Keynesians believed that low ________ during the Great Depression indicated that ________ policy was easy.

Accepted Answer

Early Keynesians believed that low interest rates during the Great Depression indicated that monetary policy was easy, as the Federal Reserve was not doing enough to increase the money supply and stimulate the economy. Fiscal policy, on the other hand, refers to the government's use of taxation and spending to influence the economy, and was not as widely used or accepted during this time period.

Question 14

Periods of price deflation,such as the Great Depression,are characterized by

Accepted Answer

During periods of price deflation, interest rates may appear low in nominal terms, but the real interest rate (adjusted for inflation) can be high. This is because deflation increases the purchasing power of money, so lenders demand higher real returns to compensate for the decrease in the value of their money over time. This phenomenon was observed during the Great Depression when there was a decrease in prices and an increase in real interest rates.

Question 15

Milton Friedman and Anna Schwartz showed that monetary policy during the Great Depression had

Accepted Answer

Milton Friedman and Anna Schwartz argued in their book "A Monetary History of the United States" that the Federal Reserve had tightened monetary policy during the early years of the Great Depression, which made the economic contraction worse. They referred to this as a "monetary contraction" and emphasized that it was a key factor driving the economic downturn. Therefore, option B - "never been more contractionary" - best reflects their analysis.

Question 16

In the early 1960s,monetarists used reduced-form timing,statistical,and historical evidence to show that

Accepted Answer

Monetarists in the early 1960s used reduced-form timing, statistical, and historical evidence to show that monetary policy had a strong impact on economic activity. They argued that changes in the money supply and interest rates could significantly affect aggregate demand and economic growth.

Question 17

Movements of ________ interest rates indicate that,contrary to the early Keynesians' beliefs,monetary policy was ________ during the Great Depression.

Accepted Answer

Real interest rates were actually tight during the Great Depression, which suggests that monetary policy was more restrictive than early Keynesians believed.

Question 18

Timing evidence is valid only if it is known that the first event is

Accepted Answer

Timing evidence is valid only if the first event is exogenous, meaning it is not influenced by other variables in the system and can be considered an independent cause of the second event.

Question 19

Early Keynesians viewed monetary policy as influencing aggregate demand solely through its impact on ________ interest rates,which,in turn,affect ________ spending.

Accepted Answer

Early Keynesians believed that monetary policy affected aggregate demand through its impact on nominal interest rates, which in turn affected investment spending. This view was later expanded to include the real interest rate and its impact on both investment and consumer spending. However, the question specifically asks about the early Keynesian view, which only considered nominal interest rates and investment spending.

Question 20

Monetarists contend that

Accepted Answer

Monetarists argue that monetary policy can affect aggregate demand through a variety of channels, including changes in interest rates, the availability of credit, and the overall level of liquidity in the economy. While they acknowledge that the link between interest rates and investment spending may be weak, they do not claim that monetary policy affects aggregate demand solely through investment or consumption.

Quiz 23: Transmission Mechanisms of Monetary Policy: The Evidence

Early Keynesians believed that interest rates during the Great Depression indicated that monetary policy was .

Friedman and Schwartz found that the rate of money growth fell prior to business cycle downturns in

By the standard of low-grade bonds,interest rates were and monetary policy was during the Great Depression.

In response to the early Keynesians,monetarists contended that

Movements of real interest rates indicate that,contrary to the early Keynesians' beliefs, policy was during the Great Depression.

Early Keynesians believed that interest rates during the Great Depression indicated that monetary policy had been .

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,

During the Great Depression,real interest rates

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the decreased before decreased.

Early Keynesians felt that policy was ,so they stressed the importance of policy.

Because evidence is of a nature,there is always the possibility of reverse causation,in which output growth causes money growth.

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in and .

Early Keynesians believed that low during the Great Depression indicated that policy was easy.

Periods of price deflation,such as the Great Depression,are characterized by

Milton Friedman and Anna Schwartz showed that monetary policy during the Great Depression had

In the early 1960s,monetarists used reduced-form timing,statistical,and historical evidence to show that

Movements of interest rates indicate that,contrary to the early Keynesians' beliefs,monetary policy was during the Great Depression.

Timing evidence is valid only if it is known that the first event is

Early Keynesians viewed monetary policy as influencing aggregate demand solely through its impact on interest rates,which,in turn,affect spending.

Monetarists contend that