Question 1

In the equation of exchange, the letter "V" stands for

Accepted Answer

A) variance. 
B) validity. 
C) volume. 
D) velocity. 
A) variance. 
B) validity. 
C) volume. 
D) velocity.

Question 2

In symbols, the equation of exchange says

Accepted Answer

A) MP = QV. 
B) MQ = PV. 
C) MV = PQ. 
D) MP = MQ. 
A) MP = QV. 
B) MQ = PV. 
C) MV = PQ. 
D) MP = MQ.

Question 3

Exhibit 14-1
  
-Refer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a fall in the money supply 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 4

Exhibit 14-1
  
-Refer to Exhibit 14-1. Starting from point A, a one-shot, demand-side-induced inflation raises the price level in the economy to P2. Assuming no other changes, in the long run the economy is likely to settle at point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
E) E. 
A) A. 
B) B. 
C) C. 
D) D. 
E) E.

Question 5

Velocity equals GDP __________ the money supply.

Accepted Answer

A) plus 
B) multiplied by 
C) divided by 
D) minus 
A) plus 
B) multiplied by 
C) divided by 
D) minus

Question 6

Changes in the money supply can affect

Accepted Answer

A) expected inflation rates. 
B) actual inflation rates. 
C) the supply of loans. 
D) a and b 
E) a, b and c 
A) expected inflation rates. 
B) actual inflation rates. 
C) the supply of loans. 
D) a and b 
E) a, b and c

Question 7

A monetarist would argue that

Accepted Answer

A) small changes in M could be offset by changes in V and not cause changes in P. 
B) changes in M in the short run can cause Real GDP to fall. 
C) prices and wages are flexible. 
D) b and c 
E) a, b and c 
A) small changes in M could be offset by changes in V and not cause changes in P. 
B) changes in M in the short run can cause Real GDP to fall. 
C) prices and wages are flexible. 
D) b and c 
E) a, b and c

Question 8

The economy is initially in long-run equilibrium. The AD curve shifts to the right and the price level rises. Assuming that the economy is self-regulating, the SRAS curve will shift to the left and the price level will rise even further. If the price level now remains constant, what have we witnessed?

Accepted Answer

A) one-shot demand-induced inflation 
B) continued demand-induced inflation 
C) one-shot supply-induced inflation 
D) one-shot inflation that was partly demand-induced and partly supply-induced 
E) continued supply-side inflation 
A) one-shot demand-induced inflation 
B) continued demand-induced inflation 
C) one-shot supply-induced inflation 
D) one-shot inflation that was partly demand-induced and partly supply-induced 
E) continued supply-side inflation

Question 9

In the equation of exchange, "PQ" stands for

Accepted Answer

A) GDP. 
B) Real GDP. 
C) nominal investment. 
D) real investment. 
A) GDP. 
B) Real GDP. 
C) nominal investment. 
D) real investment.

Question 10

If GDP is $36,000 and velocity is 3, the money supply is

Accepted Answer

A) $27,000. 
B) $12,000. 
C) $4,000. 
D) $3,000. 
E) There is not enough information provided to answer this question. 
A) $27,000. 
B) $12,000. 
C) $4,000. 
D) $3,000. 
E) There is not enough information provided to answer this question.

Question 11

Monetarists believe

Accepted Answer

A) Real GDP is not determined by M in the long run. 
B) velocity is constant. 
C) the SRAS curve is vertical. 
D) a and c 
E) a, b and c 
A) Real GDP is not determined by M in the long run. 
B) velocity is constant. 
C) the SRAS curve is vertical. 
D) a and c 
E) a, b and c

Question 12

If the Fed increases its open market purchases of government securities, it exerts a downward pressure on the interest rate. Such a phenomenon is usually referred to as the ___________________ effect.

Accepted Answer

A) income 
B) substitution 
C) open market 
D) liquidity 
E) expectations 
A) income 
B) substitution 
C) open market 
D) liquidity 
E) expectations

Question 13

When Milton Friedman said that "inflation is always and everywhere a monetary phenomenon," he was referring to

Accepted Answer

A) one-shot inflation. 
B) continued inflation. 
C) a and b 
D) neither a nor b 
A) one-shot inflation. 
B) continued inflation. 
C) a and b 
D) neither a nor b

Question 14

The California gold rush resulted in an increase in the amount of money in circulation and an increase in prices across the country.

Accepted Answer

A) True 
 B)False

Question 15

If Real GDP is $9,000, the money supply is $12,000, and velocity is 3, then the price level is

Accepted Answer

A) 2.5. 
B) 3. 
C) 4. 
D) 3.33. 
A) 2.5. 
B) 3. 
C) 4. 
D) 3.33.

Question 16

One-shot inflation is always caused by a decrease in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 17

"The money supply multiplied by velocity must equal GDP" is a statement of the

Accepted Answer

A) simple quantity theory of money. 
B) equation of exchange. 
C) modern quantity theory of money. 
D) all of the above 
A) simple quantity theory of money. 
B) equation of exchange. 
C) modern quantity theory of money. 
D) all of the above

Question 18

The liquidity, income, price-level, and expectations effects help to explain how changes in the money supply can affect the interest rate.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following variables is capable of continually increasing aggregate demand with no offsetting influence on any of the components of total spending?

Accepted Answer

A) the inflation rate 
B) the interest rate 
C) government spending 
D) the money supply 
E) the wage rate 
A) the inflation rate 
B) the interest rate 
C) government spending 
D) the money supply 
E) the wage rate

Question 20

Explain how a change in the money supply can affect the following in the short run:
a.The supply of loanable funds
b.Real GDP
c.The price level
d.The expected inflation rate

Accepted Answer

a.
As the Fed increases the money supply

Exam 14: Money and the Economy

In the equation of exchange, the letter "V" stands for

In symbols, the equation of exchange says

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

Exhibit 14-1 -Refer to Exhibit 14-1. Starting from point A, a one-shot, demand-side-induced inflation raises the price level in the economy to P2. Assuming no other changes, in the long run the economy is likely to settle at point

Velocity equals GDP __________ the money supply.

Changes in the money supply can affect

A monetarist would argue that

In the equation of exchange, "PQ" stands for

If GDP is $36,000 and velocity is 3, the money supply is

Monetarists believe

If the Fed increases its open market purchases of government securities, it exerts a downward pressure on the interest rate. Such a phenomenon is usually referred to as the ___________________ effect.

When Milton Friedman said that "inflation is always and everywhere a monetary phenomenon," he was referring to

The California gold rush resulted in an increase in the amount of money in circulation and an increase in prices across the country.

If Real GDP is $9,000, the money supply is $12,000, and velocity is 3, then the price level is

One-shot inflation is always caused by a decrease in short-run aggregate supply.

"The money supply multiplied by velocity must equal GDP" is a statement of the

The liquidity, income, price-level, and expectations effects help to explain how changes in the money supply can affect the interest rate.

Which of the following variables is capable of continually increasing aggregate demand with no offsetting influence on any of the components of total spending?

Explain how a change in the money supply can affect the following in the short run: a.The supply of loanable funds b.Real GDP c.The price level d.The expected inflation rate

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

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Exhibit 14-1 -Refer to Exhibit 14-1. Starting from point A, a one-shot, demand-side-induced inflation raises the price level in the economy to P₂. Assuming no other changes, in the long run the economy is likely to settle at point