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The Basic Classical Model Can Account for the Procyclical Behavior

Question 45
Multiple Choice

The basic classical model can account for the procyclical behavior of money if there A)are real business cycles caused by productivity shocks. B)is reverse causation from future output to money. C)are rational expectations among the public. D)are propagation mechanisms in the economy.

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Q 46
Friedman and Schwarz argue that money is not neutral because A)theoretical models of the economy don't show monetary neutrality. B)money is a leading,procyclical variable. C)they found several historical incidents in which changes in the money supply were not responses to macroeconomic conditions,and output moved in the same direction as money. D)they found no evidence that productivity changes or changes in government spending contributed to business cycles; only monetary changes preceded every recession.
Q 47
You and a friend are arguing over the issue of the nonneutrality of money.You believe that money is not neutral,and to prove your point you would cite all of the following EXCEPT A)large gold discoveries that increased the money supply preceded an economic boom. B)a change in monetary institutions preceded a boom or recession. C)a change in the leadership of the Fed and its policy was followed by noticeable changes in the money supply and a recession or inflation. D)the fact that every recession was preceded by a drop in the money supply.
Q 48
Why do many economists believe that money affects output? What is the empirical evidence in support of that belief?
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