ECON430 Fall 2014 QUIZ 4

University of University College

MONEY & BANKING ECON 430

Fall 2014

QUIZ 4 Type your name here=è

(Use multiple paragraphs when needed.)

#1: How does the Keynesian transmission mechanism purportedly work?

#2: How does the Monetarist transmission mechanism purportedly work?

#3: What is the difference between the Short Run Aggregate Supply function and the Long Run Aggregate Supply function and why is this distinction important?

#4 Is it possible for monetary policy to impact the Long Run Aggregate Supply function? What is your reasoning?

#5What does the theory of “Rational Expectations” indicate regarding monetary policy?

#6 Explain the Rational Expectations theory.

#7What is the “Liquidity Preference Theory” and why is it important to monetary policy considerations?

#8 Explain how expansionary fiscal policy affects the Keynesian Cross model. You may want to scan you diagrams to respond.

#9How does unexpected inflation impact transaction costs?

#10Describe the basic theory regarding Money Demand from a Keynesian perspective.

Bonus Question: OPTIONAL (3 points each)

Bonus #1: Use a theory from this course to explain the Great Depression.

Bonus #2: Use a theory from this course to explain the 2008 financial crisis.