Question

1. In the face of rationally formed inflationary expectations, what are the expected longer term consequences of the Fed increasing the money supply in an attempt to push output beyond its full employment level?

a. Hyperinflation.

b. Superinflation.

c. A Growth Depression.

d. Deflationary Growth.

e. Stagflation.

2. Which of the following combats inflation from the demand side?

a. The “cold turkey” approach.

b. The use of wage and price controls.

c. Tax-based incomes policies.

d. The “gradualism” approach.

e. Both A and D of the above.

3. Ten years after the “Great Recession” of 2008-2009, the fear of inflation persists because:

a. the Fed has slowed down the growth in the money supply in a dramatic fashion.

b. banks have shed themselves of excess reserves and are engaging in unsustainable levels of lending.

c. the attempt to stimulate the economy led to the monetary base expanding to over $4 trillion.

d. tax cuts have encouraged people to add this money to their saving, thus encouraging banks to loan out more money.

e. All of the above.

. 4 When time preference falls, we expect to see:

a. consumption goods prices fall.

b. an increased demand for current consumption.

c. less saving.

d. interest rates rise.

e. All of the above.

5. Why can’t Robinson Crusoe build the "Net and Stick" right away?

a. It is too expensive and he doesn’t have enough money to buy it.

b. It will take too long and he can’t save up enough berries.

c. He needs to trade in the stick first in order to get the “Net and Stick.”

d. He lacks the knowledge to actually build the “Net and Stick.”

e. All of the above.

Answer 1

1. In the face of rationally formed inflationary expectations, what are the expected longer term consequences of the Fed increasing the money supply in an attempt to push output beyond its full employment level?

a. Hyperinflation.

Hyperinflation is acclerating inflation.

2. Which of the following combats inflation from the demand side?

c. Tax-based incomes policies.

Tax based income policies lead to lower consumption.

Please post the other questions separately.