Question 1

One of the positions held by monetarists is that prices and wages are flexible.

Accepted Answer

A) True 
 B)False

Question 2

The equation of exchange is an economic theory.

Accepted Answer

A) True 
 B)False

Question 3

If the nominal interest rate is 5 percent and the expected inflation rate is 2.1 percent,the real interest rate is

Accepted Answer

A)  1.9 percent. 
B)  7.1 percent. 
C)  4.1 percent. 
D)  2.9 percent. 
E)  0.29 percent. 
A)  1.9 percent. 
B)  7.1 percent. 
C)  4.1 percent. 
D)  2.9 percent. 
E)  0.29 percent.

Question 4

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

Question 5

In seeking to explain what determines GDP,monetarists focus on the money supply while Keynesians focus on the spending components of total expenditures.

Accepted Answer

A) True 
 B)False

Question 6

Continued inflation occurs

Accepted Answer

A)  if there is a sustained increase in the price level. 
B)  only if there is a sustained increase in the price of every good and service. 
C)  only if there is a sustained increase in the price of every good and service by the same dollar amount. 
D)  only if there is a sustained increase in the price of every good and service by the same percentage. 
A)  if there is a sustained increase in the price level. 
B)  only if there is a sustained increase in the price of every good and service. 
C)  only if there is a sustained increase in the price of every good and service by the same dollar amount. 
D)  only if there is a sustained increase in the price of every good and service by the same percentage.

Question 7

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 8

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 9

If Real GDP is $900,the money supply is $1,350,and the price level is 6,then velocity is

Accepted Answer

A)  2.00. 
B)  3.33. 
C)  4.00. 
D)  7.50. 
E)  none of the above 
A)  2.00. 
B)  3.33. 
C)  4.00. 
D)  7.50. 
E)  none of the above

Question 10

Describe the difference between the simple quantity theory of money and the equation of exchange.

Accepted Answer

The equation of exchange is an identity

Question 11

The liquidity effect is the

Accepted Answer

A)  decrease in the interest rate due to an increase in the supply of loanable funds. 
B)  increase in the interest rate due to an increase in national income. 
C)  increase in the interest rate due to a higher expected inflation rate. 
D)  increase in the interest rate due to an increase in the price level. 
A)  decrease in the interest rate due to an increase in the supply of loanable funds. 
B)  increase in the interest rate due to an increase in national income. 
C)  increase in the interest rate due to a higher expected inflation rate. 
D)  increase in the interest rate due to an increase in the price level.

Question 12

A change in the money supply or a change in velocity will change aggregate demand,which causes the aggregate demand curve to shift.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

According to Milton Friedman,continued inflation is always and everywhere

Accepted Answer

A)  a supply-side phenomenon. 
B)  caused by continued decreases in aggregate supply. 
C)  caused by continued increases in the budget deficit. 
D)  a monetary phenomenon. 
E)  none of the above 
A)  a supply-side phenomenon. 
B)  caused by continued decreases in aggregate supply. 
C)  caused by continued increases in the budget deficit. 
D)  a monetary phenomenon. 
E)  none of the above

Question 15

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 16

If the money supply is $3,000,velocity is 4 and the price level is $2,then Real GDP is _____________ units of output.If the money supply doubled over a short time period to $6,000,the simple quantity theory of money would predict that ______________________.

Accepted Answer

A)  3,000; the price level would double 
B)  6,000; Real GDP would double 
C)  625; the price level would be cut in half 
D)  6,000; the price level would double 
A)  3,000; the price level would double 
B)  6,000; Real GDP would double 
C)  625; the price level would be cut in half 
D)  6,000; the price level would double

Question 17

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 18

The money supply rises from $520 billion to $556.4 billion.According to the simple quantity theory of money,the price level will ___________ by __________ percent.

Accepted Answer

A)  rise; 7 
B)  fall; 7 
C)  rise; 3.5 
D)  fall; 3.5 
A)  rise; 7 
B)  fall; 7 
C)  rise; 3.5 
D)  fall; 3.5

Question 19

When a country imposes and maintains price controls,inflation

Accepted Answer

A)  can never occur. 
B)  will result in a general surplus of goods and services. 
C)  is felt through long lines of people wanting to buy goods. 
D)  has been legislated away. 
A)  can never occur. 
B)  will result in a general surplus of goods and services. 
C)  is felt through long lines of people wanting to buy goods. 
D)  has been legislated away.

Question 20

In the monetarist version of the AD-AS framework,starting from long-run equilibrium,an increase in the money supply 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 rise in Real GDP in the short run,but not in the long run. 
D)  a rise in Real GDP in the long run,but not in the short 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 rise in Real GDP in the short run,but not in the long run. 
D)  a rise in Real GDP in the long run,but not in the short run.

Exam 14: Wages,union,and Labor

One of the positions held by monetarists is that prices and wages are flexible.

The equation of exchange is an economic theory.

If the nominal interest rate is 5 percent and the expected inflation rate is 2.1 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)?

In seeking to explain what determines GDP,monetarists focus on the money supply while Keynesians focus on the spending components of total expenditures.

Continued inflation occurs

Changes in the money supply can affect

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 $900,the money supply is $1,350,and the price level is 6,then velocity is

Describe the difference between the simple quantity theory of money and the equation of exchange.

The liquidity effect is the

A change in the money supply or a change in velocity will change aggregate demand,which causes the aggregate demand curve to shift.

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

According to Milton Friedman,continued inflation is always and everywhere

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 $3,000,velocity is 4 and the price level is $2,then Real GDP is _____________ units of output.If the money supply doubled over a short time period to $6,000,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.

The money supply rises from $520 billion to $556.4 billion.According to the simple quantity theory of money,the price level will ___________ by __________ percent.

When a country imposes and maintains price controls,inflation

In the monetarist version of the AD-AS framework,starting from long-run equilibrium,an increase in the money supply produces

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility 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

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

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The Economic Case for and Against Government: Five Topics Considered

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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 $3,000,velocity is 4 and the price level is $2,then Real GDP is _ units of output.If the money supply doubled over a short time period to $6,000,the simple quantity theory of money would predict that __________.

The money supply rises from $520 billion to $556.4 billion.According to the simple quantity theory of money,the price level will _ by percent.