1) Which of the following is consistent with monetarism?

• Inflation is caused by high federal taxes.
• Recession is caused by high federal taxes.
• Inflation is caused when the Fed increases the money supply too rapidly.
• Recession is caused by the increased production of capital goods.
• Inflation is caused by the increased production of capital goods.

2) Which of the following fiscal policies would be most effective in battling hyperinflation (high inflation)?

• An increase in government spending.
• A decrease in government spending.
• A decrease in personal income taxes.
• An open market sale of bonds.
• An open market purchase of bonds.

3) When a change in interest rates impacts the international value of the dollar limiting the effectiveness of fiscal policy, it is due to

• crowding out.
• crowding in.
• the slope of the AS curve.
• the net export effect.
• exogenous shocks.