SOLVED

26.1Â Â Is the Private Sector Inherently Stable? 1) If inflation becomes a serious problem, a Monetarist-oriented President is likely to favor a policy emphasizing A) slower monetary growth. B) lower interest rates. C) higher taxes. D) wage and price controls. 2) A President who favors the use of government spending and taxes as tools to offset instability in the economy is likely to have advisers who are oriented toward A) Keynesian economics. B) Monetarist economics. C) rational expectations. D) the policies advocated by Milton Friedman. 3) __________ argue that any exogenous decrease in investment spending would be countered automatically by either increased consumption or interest-sensitive investment spending. A) Monetarists B) Keynesians C) Classical economists D) None of the above. 4) From the Monetarist perspective, an autonomous downward shift in investment will A) shift the aggregate demand curve to the left. B) shift the aggregate demand curve to the right. C) have little effect on the aggregate demand curve. D) cause a downward shift in the consumption function. 5) Monetarists argue that an exogenous increase in investment spending is likely to be offset by a decrease in A) the money supply. B) interest rates. C) government spending. D) consumption. 6) Monetarists argue that an exogenous fall in investment spending leads to A) declining real output. B) declining money supply. C) declining velocity. D) declining interest rates. 7) If there is an exogenous decrease in investment spending, Monetarists argue that there would be little or no effect on real output because the interest rate would __________, investment would __________, saving would __________, and consumption would __________. A) decline; increase; increase; decrease B) decline; increase; decrease; increase C) rise; decrease; decrease; increase D) rise; decrease; increase; increase 8) If there is an exogenous increase in investment spending, Monetarists argue that there would be little or no effect on real output because the interest rate would __________, investment would __________, saving would __________, and consumption would __________. A) decline; increase; increase; decrease B) decline; increase; decrease; increase C) rise; decrease; decrease; increase D) rise; decrease; increase; decrease 9) From the Keynesian perspective, an exogenous increase in investment is likely to lead to A) a decrease in interest rates. B) an increase in output. C) an increase in the money supply. D) a decrease in government spending. 10) Keynesians argue that an exogenous decrease in investment is likely to lead to A) an increase in interest rates. B) an increase in saving. C) a decrease in the money supply. D) a decrease in output.