(Solution)-But the experience of M1 still unnerves


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13. "But the experience of M1 still unnerves: innovations in the banking system, especially interest-bearing checking accounts which at that time were not counted in M1, allowed the public to shift money holdings into and out of different instruments in such as way as to make the relationship between M1 and total spending in the economy unstable." The unnerving experience with M1 was that M1 velocity wasa) constant b) unstable c) increasing steadily d) decreasing steadily14. "A monetary rule need not mean a single, bald number. If the central bank fears velocity shifts, rules could be adopted for adjusting the target in the face of a trend change in velocity." If velocity were trending upward, the target money growth rate would be adjusteda) upward b) downward c) to be zero d) to match inflation15. "If the Fed's sole objective is going to be fighting inflation, it may as well be run by a computer, say critics of a proposal to change its mandate." According to the monetarists, to run the Fed's inflation-fighting policy the computer should be programmed toa) keep the money supply constantb) increase money supply growth in recessions and decrease it in boomsc) increase money supply growth in booms and decrease it during recessionsd) increase the money supply at the same rate during booms and recessions


Solution ID:10086545 | Question answered on 16-Oct-2016

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