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19 Jun 2023, 20:00
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Question 1
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
76% (02:38) correct
24%
(02:17) wrong
based on 65
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
32% (01:29) correct 68%
(01:21) wrong
based on 69
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
86% (00:17) correct 14%
(00:28) wrong
based on 66
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
73% (00:36) correct 27%
(01:04) wrong
based on 67
sessions
History
Date
Time
Result
Not Attempted Yet
Question 5
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
95%
(hard)
Question Stats:
22% (01:15) correct 78%
(00:47) wrong
based on 63
sessions
History
Date
Time
Result
Not Attempted Yet
Monetarism, the economic theory associated with Milton Friedman (although it long preceded him), argues that major variations in the economy derive from changes in the supply of money, rather than, for example, fluctuations in stock prices. According to this theory, the way to maintain stability in the economic system is to ensure stability in the amount of money issued, increasing that amount only in relation to an increase in the gross domestic product (GDP).
Unlike Keynesians, monetarists believe that the role of government in economics should be minimal and that fiscal policy is often damaging to the overall economy. They tend to assume that markets work best when they are left to their own devices, preferring a laissez-faire course of inaction to governmental interference in the marketplace.
In the 1970s, this theory seemed to gibe with the inflation spikes that were occurring—although to some degree inflation was tagged to oil prices, there was also a clear rate of money growth that could be a secondary cause. Monetarists insisted that the Federal Reserve System should never manipulate the money supply in an attempt to stabilize the economy—that the economy was essentially stable as long as the money supply was stable, and no other discretionary policies were needed. However, inflation in the 1990s was unrelated to monetary policy, and in the 2000s, it became clear that pure monetary policy was unable to stimulate the economy in any lasting way.
Ultimately, monetarists seem to have succeeded in one thing only: Today’s monetary authorities better understand the role of money in the stability of economies and recognize the need for caution in the manipulation of the money supply. Fiscal policy is no longer divorced from monetary policy, and the two work in tandem to inject stability into the system.
Unlike Keynesians, monetarists believe that the role of government in economics should be minimal and that fiscal policy is often damaging to the overall economy. They tend to assume that markets work best when they are left to their own devices, preferring a laissez-faire course of inaction to governmental interference in the marketplace.
In the 1970s, this theory seemed to gibe with the inflation spikes that were occurring—although to some degree inflation was tagged to oil prices, there was also a clear rate of money growth that could be a secondary cause. Monetarists insisted that the Federal Reserve System should never manipulate the money supply in an attempt to stabilize the economy—that the economy was essentially stable as long as the money supply was stable, and no other discretionary policies were needed. However, inflation in the 1990s was unrelated to monetary policy, and in the 2000s, it became clear that pure monetary policy was unable to stimulate the economy in any lasting way.
Ultimately, monetarists seem to have succeeded in one thing only: Today’s monetary authorities better understand the role of money in the stability of economies and recognize the need for caution in the manipulation of the money supply. Fiscal policy is no longer divorced from monetary policy, and the two work in tandem to inject stability into the system.
1. From the presentation of the information in the passage, it can reasonably be inferred that the author believes which of the following about monetarism?
(A) It is a failed theory with little bearing on today’s economy.
(B) It is more relevant today than Keynesianism is.
(C) It should have focused less on the money supply and more on GDP.
(D) It took old laissez-faire theories and turned them upside down.
(E) Its main premise failed, but it still influences current policy.
(A) It is a failed theory with little bearing on today’s economy.
(B) It is more relevant today than Keynesianism is.
(C) It should have focused less on the money supply and more on GDP.
(D) It took old laissez-faire theories and turned them upside down.
(E) Its main premise failed, but it still influences current policy.
2. Based on the passage, a true monetarist would most likely agree with which of the following statements?
(A) Changes in prices are not linked to expansion or contraction of the national money supply.
(B) An increase in money supply in one nation can easily destabilize the economy of a neighboring nation.
(C) To stabilize the economy, the government of an underdeveloped nation must invest in several industries simultaneously.
(D) The Great Depression represented a time of too little money infused throughout the system.
(E) Lowering taxes and decreasing regulation are required steps for any economic growth.
(A) Changes in prices are not linked to expansion or contraction of the national money supply.
(B) An increase in money supply in one nation can easily destabilize the economy of a neighboring nation.
(C) To stabilize the economy, the government of an underdeveloped nation must invest in several industries simultaneously.
(D) The Great Depression represented a time of too little money infused throughout the system.
(E) Lowering taxes and decreasing regulation are required steps for any economic growth.
3. Which of the following titles would be most appropriate for this passage?
(A) “Keynesian vs. Monetarist Thought”
(B) “Nobelist Friedman and the Chicago School”
(C) “A Brief Look at Monetarism”
(D) “The Proper Role of Money”
(E) “Failed Policies at the Fed”
(A) “Keynesian vs. Monetarist Thought”
(B) “Nobelist Friedman and the Chicago School”
(C) “A Brief Look at Monetarism”
(D) “The Proper Role of Money”
(E) “Failed Policies at the Fed”
4. The author implies which of the following about monetarist theory?
(A) It was devised as a means to counter Keynesianism.
(B) It was tied to politics and thus doomed to failure.
(C) It weakened the role of the Federal Reserve System.
(D) It failed to take globalization into account.
(E) It fit patterns of the 1970s but not of the 1990s.
(A) It was devised as a means to counter Keynesianism.
(B) It was tied to politics and thus doomed to failure.
(C) It weakened the role of the Federal Reserve System.
(D) It failed to take globalization into account.
(E) It fit patterns of the 1970s but not of the 1990s.
5. Based on the second paragraph, you might infer that the relationship of Keynesians to monetarists is most similar to the relationship between
(A) monarchists and republicans
(B) federalists and nationalists
(C) globalists and regionalists
(D) conservatives and neo-conservatives
(E) statists and libertarians
(A) monarchists and republicans
(B) federalists and nationalists
(C) globalists and regionalists
(D) conservatives and neo-conservatives
(E) statists and libertarians
RC Butler 2023 - Practice Two RC Passages Everyday.
Passage # 199 Date: 20-Jun-2023
This question is part of RC Butler 2023. Click here for Details
Passage # 199 Date: 20-Jun-2023
This question is part of RC Butler 2023. Click here for Details
25 Jun 2023, 09:53
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Ruchi007
Based on the information provided in the second paragraph, the relationship of Keynesians to monetarists is most similar to the relationship between (E) statists and libertarians. Monetarists, like libertarians, believe in minimal government intervention in the economy and prefer a laissez-faire approach. Keynesians, like statists, believe in a more active role for government in economic affairs.
