Question 1

The liquidity, income, price-level, and expectations effects help to explain how changes in ________________can affect _______________.

Accepted Answer

A) the money supply; the interest rate 
B) velocity; the interest rate 
C) the interest rate; the money supply 
D) velocity; Real GDP 
E) Real GDP; the money supply 
A) the money supply; the interest rate 
B) velocity; the interest rate 
C) the interest rate; the money supply 
D) velocity; Real GDP 
E) Real GDP; the money supply

Question 2

If GDP is $8,000 billion and the money supply is $1,200 billion, velocity is approximately

Accepted Answer

A) 0.20. 
B) 6.67. 
C) 0.15. 
D) 5.00. 
E) There is not enough information provided to answer this question. 
A) 0.20. 
B) 6.67. 
C) 0.15. 
D) 5.00. 
E) There is not enough information provided to answer this question.

Question 3

The simple quantity theory of money predicts that if

Accepted Answer

A) the money supply rises by $200, then GDP falls by $200. 
B) GDP rises by $400, then the money supply rises by $400. 
C) the money supply rises by 10 percent, then the price level rises by 10 percent. 
D) the money supply falls by $300, then GDP rises by $300. 
A) the money supply rises by $200, then GDP falls by $200. 
B) GDP rises by $400, then the money supply rises by $400. 
C) the money supply rises by 10 percent, then the price level rises by 10 percent. 
D) the money supply falls by $300, then GDP rises by $300.

Question 4

In the simple quantity theory of money, Real GDP and velocity are assumed to be constant.

Accepted Answer

A) True 
 B)False

Question 5

Monetarists believe that an increase in the money supply will raise both Real GDP and the price level in the short run, and will only raise Real GDP in the long run.

Accepted Answer

A) True 
 B)False

Question 6

According to the equation of exchange, if GDP equals $12,000 billion and the money supply equals $3,000 billion, the velocity of money

Accepted Answer

A) must be 8. 
B) must be 4. 
C) must be 0.4 billion. 
D) must be 450 billion. 
E) cannot be determined without knowing what the price level is. 
A) must be 8. 
B) must be 4. 
C) must be 0.4 billion. 
D) must be 450 billion. 
E) cannot be determined without knowing what the price level is.

Question 7

When the Fed conducts open market operations, the impact of the buying or selling of bonds will include changes in

Accepted Answer

A) SRAS. 
B) interest rates. 
C) LRAS. 
D) a and b 
E) a, b and c 
A) SRAS. 
B) interest rates. 
C) LRAS. 
D) a and b 
E) a, b and c

Question 8

In the monetarist version of the AD-AS framework, starting from long-run equilibrium, a decrease in velocity produces

Accepted Answer

A) no change in Real GDP in the short run or the long run. 
B) a rise in Real GDP in both the short run and the long run. 
C) a fall in Real GDP in both the short run and the long run. 
D) a fall in Real GDP in the short run, but not in the long run. 
E) no change in Real GDP in the short run, but a rise in the long run. 
A) no change in Real GDP in the short run or the long run. 
B) a rise in Real GDP in both the short run and the long run. 
C) a fall in Real GDP in both the short run and the long run. 
D) a fall in Real GDP in the short run, but not in the long run. 
E) no change in Real GDP in the short run, but a rise in the long run.

Question 9

If the nominal interest rate is 4 percent and the expected inflation rate is 1.5 percent, the real interest rate is

Accepted Answer

A) 3.5 percent. 
B) 5.5 percent. 
C) 4 percent. 
D) 2.5 percent. 
E) 0.25 percent. 
A) 3.5 percent. 
B) 5.5 percent. 
C) 4 percent. 
D) 2.5 percent. 
E) 0.25 percent.

Question 10

If the simple quantity theory of money predicts well, what would we expect to see (in the real world)?

Accepted Answer

A) changes in the money supply strongly correlated with changes in interest rates 
B) changes in the money supply strongly correlated with changes in inflation rates 
C) changes in Real GDP strongly correlated with changes in the money supply 
D) changes in velocity strongly correlated with changes in the money supply 
E) none of the above 
A) changes in the money supply strongly correlated with changes in interest rates 
B) changes in the money supply strongly correlated with changes in inflation rates 
C) changes in Real GDP strongly correlated with changes in the money supply 
D) changes in velocity strongly correlated with changes in the money supply 
E) none of the above

Exam 14: Money and the Economy

The liquidity, income, price-level, and expectations effects help to explain how changes in ________________can affect _______________.

If GDP is $8,000 billion and the money supply is $1,200 billion, velocity is approximately

The simple quantity theory of money predicts that if

In the simple quantity theory of money, Real GDP and velocity are assumed to be constant.

Monetarists believe that an increase in the money supply will raise both Real GDP and the price level in the short run, and will only raise Real GDP in the long run.

According to the equation of exchange, if GDP equals $12,000 billion and the money supply equals $3,000 billion, the velocity of money

When the Fed conducts open market operations, the impact of the buying or selling of bonds will include changes in

In the monetarist version of the AD-AS framework, starting from long-run equilibrium, a decrease in velocity produces

If the nominal interest rate is 4 percent and the expected inflation rate is 1.5 percent, the real interest rate is

If the simple quantity theory of money predicts well, what would we expect to see (in the real world)?

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

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The liquidity, income, price-level, and expectations effects help to explain how changes in __can affect _.