Milton Friedman's Argument Was That the Central Bank Should Follow

question 16

Multiple Choice

Milton Friedman's argument was that the central bank should follow a monetary policy rule so that the money supply would:

• A) grow at a slow and steady rate.
• B) remain constant.
• C) grow proportionally with the price level.
• D) grow at the same rate as the GDP growth rate.

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Definitions:

Original Cost

The initial amount of money spent to acquire an asset, including purchase price and all expenses incurred to bring it to its intended use.

Unrealized Gain

A profit that exists on paper as a result of an investment increasing in value but has not yet been sold for cash.

Available-for-Sale Investments

Securities that are not classified as held-to-maturity or trading securities and can be sold in the short-term or kept for long-term holdings, with unrealized gains or losses reported in other comprehensive income.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing ownership interest in the company.