Sort each statement into the appropriate economic school of thought.
Fiscal policy, such as tax cuts, will only affect the level of domestic output, if it entails a change in the supply of money.
Evidence suggest that the velocity of money is variable over time and that there is no close link between the money supply and the level of economic activity.
Deficit financing will increase interest rates and reduce private investment spending.
Although monetary policy is a significant stabilization device, it is secondary to fiscal policy as an economic stabilizer.
The asset demand for money...that is, the amount of money held as a store of value....varies inversely and significantly with the interest rate.
A change in the money supply will cause the velocity of money to vary in the opposite direction.
Deficit financing is not expansionary because it "crowds out" private investment spending.
Government interference with the functioning of the economy has tended to make the economy more unstable.
Discretionary fiscal policy has been a source of economic instability.
What a Monetarist would say....(5 of these)
What a Keynesian economist would say.... (4 of these)
Sort each statement into the appropriate economic school of thought.
The aggregate supply curve is relatively steep.
The demand-for-money curve is relatively steep and the investment-demand curve is relatively flat.
Monetary policy affects ONLY bank reserves, the money supply, interest rates, investment spending, and finally nominal GDP.
The aggregate supply curve is relatively flat.
The demand-for-money curve is relatively flat and the investment demand curve is relatively steep.
A change in the money supply directly affects NGDP.
The crowding-out effect is large.
The crowding-effect is small.
What a Monetarist would say....(4 of these)
What a Keynesian economist would say... (4 of these)