Question 1

Exhibit 14-2
  
-Refer to Exhibit 14-2. The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7. What explains this?

Accepted Answer

A) an initial decrease in SRAS, followed by alternating rises in AD and decreases in SRAS 
B) continued increases in AD 
C) continued decreases in SRAS 
D) an initial rise in the price level, followed by a decrease in SRAS, and then alternating increases in AD and decreases in SRAS 
E) continued increases in SRAS 
A) an initial decrease in SRAS, followed by alternating rises in AD and decreases in SRAS 
B) continued increases in AD 
C) continued decreases in SRAS 
D) an initial rise in the price level, followed by a decrease in SRAS, and then alternating increases in AD and decreases in SRAS 
E) continued increases in SRAS

Question 2

If the money supply is $2,000, velocity is 4, and Real GDP is 1,000 units of output, then the price level is _____________. If the money supply doubled over a short time period, the simple quantity theory of money would predict that _____________________.

Accepted Answer

A) $8; the price level would double 
B) $8; Real GDP would double 
C) $8; the price level would be cut in half 
D) $4; the price level would double 
A) $8; the price level would double 
B) $8; Real GDP would double 
C) $8; the price level would be cut in half 
D) $4; the price level would double

Question 3

Monetarists believe that

Accepted Answer

A) velocity changes in a predictable way. 
B) aggregate supply depends on the money supply and velocity. 
C) the SRAS curve is upward sloping. 
D) a and c 
E) a, b and c 
A) velocity changes in a predictable way. 
B) aggregate supply depends on the money supply and velocity. 
C) the SRAS curve is upward sloping. 
D) a and c 
E) a, b and c

Question 4

Suppose we are at a long-run equilibrium point in an AD-AS model. Then the money supply falls. In the short run, is there any difference between what happens in the simple quantity theory of money (SQTM) version and the monetarist version of the model?

Accepted Answer

A) There is no difference. 
B) In the SQTM version, the price level falls; in the monetarist version, it does not. 
C) In the monetarist version, Real GDP falls; in the SQTM version, it does not. 
D) In the monetarist version, the price level falls; in the SQTM version, it does not. 
E) In the SQTM version, Real GDP falls; in the monetarist version, it does not. 
A) There is no difference. 
B) In the SQTM version, the price level falls; in the monetarist version, it does not. 
C) In the monetarist version, Real GDP falls; in the SQTM version, it does not. 
D) In the monetarist version, the price level falls; in the SQTM version, it does not. 
E) In the SQTM version, Real GDP falls; in the monetarist version, it does not.

Question 5

Monetarists believe that velocity

Accepted Answer

A) is constant. 
B) changes erratically. 
C) and the money supply always have an inverse relationship. 
D) changes in a way that can be understood and predicted. 
A) is constant. 
B) changes erratically. 
C) and the money supply always have an inverse relationship. 
D) changes in a way that can be understood and predicted.

Question 6

If the money supply is $20,000, velocity is 3, and Real GDP is 5,000 units of output, then the price level is _____________. If the money supply doubled over a short time period to $40,000, the simple quantity theory of money would predict that _____________________.

Accepted Answer

A) $12; the price level would double 
B) $6; Real GDP would double 
C) $12; the price level would be cut in half 
D) $6; the price level would double 
A) $12; the price level would double 
B) $6; Real GDP would double 
C) $12; the price level would be cut in half 
D) $6; the price level would double

Question 7

If the money supply is $6,000, velocity is 5, and Real GDP is 10,000 units of output, then the price level is _____________. If the money supply doubled over a short time period to $12,000, the simple quantity theory of money would predict that _____________________.

Accepted Answer

A) $3; the price level would double 
B) $3; Real GDP would double 
C) $3; the price level would be cut in half 
D) $2; the price level would double 
A) $3; the price level would double 
B) $3; Real GDP would double 
C) $3; the price level would be cut in half 
D) $2; the price level would double

Question 8

The change in the interest rate brought on by a change in Real GDP is referred to as the __________ effect.

Accepted Answer

A) liquidity 
B) expectations 
C) income 
D) nominal 
A) liquidity 
B) expectations 
C) income 
D) nominal

Question 9

Ceteris paribus, the greater the increase in the money supply, the __________ the inflation rate, the __________ the expected inflation rate, and the __________ the interest rate.

Accepted Answer

A) higher; higher; higher 
B) lower; lower; lower 
C) higher; lower; higher 
D) lower; higher; lower 
E) higher; lower; lower 
A) higher; higher; higher 
B) lower; lower; lower 
C) higher; lower; higher 
D) lower; higher; lower 
E) higher; lower; lower

Question 10

Exhibit 14-1
  
-Refer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a rise in velocity under monetarist assumptions?

Accepted Answer

A) A-E-B 
B) B-D-A 
C) A-D-B 
D) B-A 
A) A-E-B 
B) B-D-A 
C) A-D-B 
D) B-A

Question 11

The aggregate supply curve in the short run is vertical in __________ version of the AD-AS framework.

Accepted Answer

A) the simple quantity theory of money 
B) the monetarist 
C) both the simple quantity theory of money and the monetarist 
D) neither the simple quantity theory of money nor the monetarist 
A) the simple quantity theory of money 
B) the monetarist 
C) both the simple quantity theory of money and the monetarist 
D) neither the simple quantity theory of money nor the monetarist

Question 12

According to the simple quantity theory of money in the AD-AS framework, when the money supply decreases, the __________ curve shifts to the __________.

Accepted Answer

A) AD; left 
B) AD; right 
C) AS; left 
D) AS; right 
A) AD; left 
B) AD; right 
C) AS; left 
D) AS; right

Question 13

In the equation of exchange, the average number of times a dollar is used to purchase a final good or service is the __________ of money.

Accepted Answer

A) turnover 
B) elasticity 
C) velocity 
D) transfer 
A) turnover 
B) elasticity 
C) velocity 
D) transfer

Question 14

In the monetarist version of the AD-AS framework, an increase in the money supply produces a __________ shift of the __________ curve.

Accepted Answer

A) rightward; AD 
B) rightward; SRAS 
C) leftward; AD 
D) leftward; SRAS 
A) rightward; AD 
B) rightward; SRAS 
C) leftward; AD 
D) leftward; SRAS

Question 15

Explain in detail how the California gold rush contributed to rising prices in the early 1850's.

Accepted Answer

The discovery and mining of gold in Cali

Question 16

If M = $6,000, P = $10, and Q = 2,400, then V is

Accepted Answer

A) 2.0. 
B) 4.0. 
C) 5.0 
D) 6.0 
E) 8.0 
A) 2.0. 
B) 4.0. 
C) 5.0 
D) 6.0 
E) 8.0

Question 17

Which of the following statements is true?

Accepted Answer

A) To a large degree, Keynesians focus on the spending components of total expenditures when they seek to understand what determines GDP; monetarists focus on the money supply and velocity when their objective is the same. 
B) To a large degree, monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; Keynesians focus on the money supply and velocity when their objective is the same. 
C) Both Keynesians and monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; neither group focuses on the money supply and velocity. 
D) Neither Keynesians nor monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; both focus on the money supply and velocity. 
A) To a large degree, Keynesians focus on the spending components of total expenditures when they seek to understand what determines GDP; monetarists focus on the money supply and velocity when their objective is the same. 
B) To a large degree, monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; Keynesians focus on the money supply and velocity when their objective is the same. 
C) Both Keynesians and monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; neither group focuses on the money supply and velocity. 
D) Neither Keynesians nor monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP; both focus on the money supply and velocity.

Question 18

Suppose the Fed buys government securities from the public. The liquidity effect of this is that the interest rate will

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) any of the above are possible 
A) increase. 
B) decrease. 
C) remain constant. 
D) any of the above are possible

Question 19

One-shot inflation can result from an increase in aggregate demand or an increase in aggregate supply.

Accepted Answer

A) True 
 B)False

Question 20

According to monetarists, if the economy is initially in long-run equilibrium, an increase in the money supply will __________ the price level and Real GDP in the short run, and will __________ only __________ in the long run.

Accepted Answer

A) lower; lower; the price level 
B) raise; raise; Real GDP 
C) raise; lower; Real GDP 
D) raise; raise; the price level 
E) raise; raise; the unemployment rate 
A) lower; lower; the price level 
B) raise; raise; Real GDP 
C) raise; lower; Real GDP 
D) raise; raise; the price level 
E) raise; raise; the unemployment rate

Exam 14: Money and the Economy

Exhibit 14-2 -Refer to Exhibit 14-2. The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7. What explains this?

If the money supply is $2,000, velocity is 4, and Real GDP is 1,000 units of output, then the price level is _____________. If the money supply doubled over a short time period, the simple quantity theory of money would predict that _____________________.

Monetarists believe that

Suppose we are at a long-run equilibrium point in an AD-AS model. Then the money supply falls. In the short run, is there any difference between what happens in the simple quantity theory of money (SQTM) version and the monetarist version of the model?

Monetarists believe that velocity

If the money supply is $20,000, velocity is 3, and Real GDP is 5,000 units of output, then the price level is _____________. If the money supply doubled over a short time period to $40,000, the simple quantity theory of money would predict that _____________________.

If the money supply is $6,000, velocity is 5, and Real GDP is 10,000 units of output, then the price level is _____________. If the money supply doubled over a short time period to $12,000, the simple quantity theory of money would predict that _____________________.

The change in the interest rate brought on by a change in Real GDP is referred to as the __________ effect.

Ceteris paribus, the greater the increase in the money supply, the __________ the inflation rate, the __________ the expected inflation rate, and the __________ the interest rate.

Exhibit 14-1 -Refer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a rise in velocity under monetarist assumptions?

The aggregate supply curve in the short run is vertical in __________ version of the AD-AS framework.

According to the simple quantity theory of money in the AD-AS framework, when the money supply decreases, the __________ curve shifts to the __________.

In the equation of exchange, the average number of times a dollar is used to purchase a final good or service is the __________ of money.

In the monetarist version of the AD-AS framework, an increase in the money supply produces a __________ shift of the __________ curve.

Explain in detail how the California gold rush contributed to rising prices in the early 1850's.

If M = $6,000, P = $10, and Q = 2,400, then V is

Which of the following statements is true?

Suppose the Fed buys government securities from the public. The liquidity effect of this is that the interest rate will

One-shot inflation can result from an increase in aggregate demand or an increase in aggregate supply.

According to monetarists, if the economy is initially in long-run equilibrium, an increase in the money supply will __________ the price level and Real GDP in the short run, and will __________ only __________ in the long run.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Monetary Policy

Expectations Theory and the Economy

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Debates in Macroeconomics Over the Role and Effects of Government

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Factor Markets With Emphasis on the Labor Market

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The Distribution of Income and Poverty

Interest Rent and Profit

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If the money supply is $2,000, velocity is 4, and Real GDP is 1,000 units of output, then the price level is _. If the money supply doubled over a short time period, the simple quantity theory of money would predict that _________.

If the money supply is $20,000, velocity is 3, and Real GDP is 5,000 units of output, then the price level is _. If the money supply doubled over a short time period to $40,000, the simple quantity theory of money would predict that _________.

If the money supply is $6,000, velocity is 5, and Real GDP is 10,000 units of output, then the price level is _. If the money supply doubled over a short time period to $12,000, the simple quantity theory of money would predict that _________.

Ceteris paribus, the greater the increase in the money supply, the the inflation rate, the the expected inflation rate, and the __ the interest rate.

According to the simple quantity theory of money in the AD-AS framework, when the money supply decreases, the curve shifts to the .

In the monetarist version of the AD-AS framework, an increase in the money supply produces a shift of the curve.

According to monetarists, if the economy is initially in long-run equilibrium, an increase in the money supply will the price level and Real GDP in the short run, and will only __ in the long run.