Monetary History: Sample Quiz

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1. In the late 19th century the political career of William Jennings Bryan was partly based on:

popular discontent with deflation caused by the gold standard.
his denunciation of "fine tuning."
policy errors of the Federal Reserve.
his early advocacy of Keynesian economics.

2. The group of economists that came to prominence in the 1960s and 1970s and that argued that the Great Depression was caused by policy errors of the Federal Reserve was the:

Keynesians.
new Keynesians.
monetarists.
new classical economists.

3. Compared to the early 1960s, in the late 1960s monetary growth rates and interest rates were both high. As a result, monetarists would say that monetary policy was:

tight, and Keynesians would agree.
tight, and Keynesians would disagree.
easy, and Keynesians would agree.
easy, and Keynesians would disagree.

4. What was the result of the effort of the Fed to control inflation in 1979 and the early 1980s?

They cut inflation but also caused a severe recession.
They caused a serve recession but had no effect on inflation.
They caused a serve recession and the rate of inflation increased.
They cut inflation with no effect on output.

5. In the late 1970s the Fed decided that it had to act to bring down the rate of inflation. What policy did it adopt?

Cut money growth, which had the short-run effect of raising interest rates
Increased money growth, which had the short-run effect of raising interest rates
Cut money growth, which had the short-run effect of lowering interest rates
Increased money growth, which had the short-run effect of lowering interest rates

6. In the late 1970s and early 1980s velocity of money changed trend and became more erratic. What effect did this have on monetary policy?

It caused the Fed to drop monetary aggregates and shift to the federal-funds rate as a guide for policy.
It made the Fed shift away from worrying about unemployment to a greater concern for inflation.
It made the Fed shift away from worrying about inflation to a greater concern for unemployment.
It made the Fed worry more about speculation in financial markets.

7. What does today's Fed see as it main role in the economy?

insuring deposits at banks.
preventing overspeculation in the stock market.
preventing fraud in financial markets.
keeping the price level stable.

8. If a country is has flexible exchange rates and has more rapid inflation than other countries, its currency will:

appreciate.
depreciate.
revalue.
devalue.

9. The gold standard was an example of what kind of exchange-rate system?

A freely floating exchange rate
A managed floating exchange rate
A fixed exchange rate
A non-convertible exchange rate

10. If the Japanese central bank buys U.S. dollars to prevent the price of the yen from changing, this action:

has the same effect on Japan's money stock as a purchase of bonds in the open market.
decreased bank reserves in the United States by the amount of the purchase.
increased the money stock in the United States.
decreased bank reserves of Japanese banks by the amount of the purchase.
would have no effect on anyone's money.

11. As compared to a system of fixed exchange rates, a system of floating rates will do what to fiscal and monetary policy?

Fiscal policy will be weaker and monetary policy strengthened.
Fiscal policy will be strengthened and monetary policy weakened.
Both fiscal and monetary policy will be strengthened.
Both fiscal and monetary policy will be weakened.

12. Germany could not have had the massive inflation that it had in the 1920s if it had:

had floating exchange rates.
had a central bank.
been on the gold standard and followed its rules.
had deposit insurance.

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Copyright Robert Schenk