1. Economists who accept the quantity theory of money argue that inflation is always and everywhere a monetary phenomenon. [True or False]
2. Economists who accept the quantity theory of money favor a monetary rule because they believe the short-run effects of monetary policy are unpredictable and the long-run effects are on the price level, not real output. [True or False]
3. The insider/outsider model of inflation is based upon highly competitive labor markets. [True or False]
4. A government budget deficit occurs when government revenues exceed government expenditures. [True or False]
5. The portion of the budget deficit or surplus that would exist even if the economy were at potential income is called the passive deficit or surplus. [True or False]
Ans. 1) True
Reason - Economists accepting QTM believe that inflation is always cause by monetary policies.
As mentioned in statement, they believe that short run effects can't be predicted and long run effects of monetary policy are on inflation.
The insider/outsider model of inflation is based on less competitive labour market.
A government budget deficit occurrs when govt expenses exceed its receipts.
As it is known as cyclical deficit or surplus.
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