Question 1

The simple quantity theory of money predicts that the larger the percentage change in the money supply,the larger the percentage change in Real GDP.

Accepted Answer

A) True 
 B)False

Question 2

-Refer to Exhibit 14-1.A continued increase in the price of oil,combined with Fed attempts to respond to these oil shocks by increasing aggregate demand,is likely to take the economy along which of the following paths?

Accepted Answer

A)  A-E-B-H-C 
B)  A-E-G-I-C 
C)  A-D-B-E-A 
D)  A-D-B-H-C 
E)  A-E-B-I-C 
A)  A-E-B-H-C 
B)  A-E-G-I-C 
C)  A-D-B-E-A 
D)  A-D-B-H-C 
E)  A-E-B-I-C

Question 3

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

The velocity of money is the __________ number of times a dollar is spent to buy final goods and services in a year.

Accepted Answer

A)  total 
B)  average 
C)  marginal 
D)  statistical 
A)  total 
B)  average 
C)  marginal 
D)  statistical

Question 5

Suppose the economy starts off producing Natural Real GDP.Next,aggregate supply rises,ceteris paribus.As a result,the price level falls in the short run.In the long run,when the economy has moved back to producing Natural Real GDP,the price level will be

Accepted Answer

A)  higher than it was in short-run equilibrium. 
B)  lower than it was in short-run equilibrium but higher than it was originally (before aggregate supply rose). 
C)  lower than it was originally (before aggregate supply rose). 
D)  equal to what it was originally (before aggregate supply rose). 
A)  higher than it was in short-run equilibrium. 
B)  lower than it was in short-run equilibrium but higher than it was originally (before aggregate supply rose). 
C)  lower than it was originally (before aggregate supply rose). 
D)  equal to what it was originally (before aggregate supply rose).

Question 6

According to monetarists,changes in velocity can

Accepted Answer

A)  lower GDP 
B)  raise GDP 
C)  shift the SRAS,but not the LRAS 
D)  a and b 
E)  a,b and c 
A)  lower GDP 
B)  raise GDP 
C)  shift the SRAS,but not the LRAS 
D)  a and b 
E)  a,b and c

Question 7

Can a one-time increase in the supply of money cause one-shot inflation?

Accepted Answer

A)  Yes,because it shifts the aggregate demand curve rightward. 
B)  No,because it cannot shift the aggregate demand curve rightward. 
C)  Yes,because it shifts the aggregate demand curve leftward. 
D)  Yes,because it shifts the aggregate supply curve rightward. 
A)  Yes,because it shifts the aggregate demand curve rightward. 
B)  No,because it cannot shift the aggregate demand curve rightward. 
C)  Yes,because it shifts the aggregate demand curve leftward. 
D)  Yes,because it shifts the aggregate supply curve rightward.

Question 8

Which of the following factors can change continually in such a way as to bring about continued increases in aggregate demand?

Accepted Answer

A)  autonomous consumption 
B)  autonomous investment 
C)  government spending 
D)  the money supply 
E)  all of the above 
A)  autonomous consumption 
B)  autonomous investment 
C)  government spending 
D)  the money supply 
E)  all of the above

Question 9

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 10

List and describe the four positions held by monetarists that help to explain the monetarists view of the economy.

Accepted Answer

Monetarists assume that velocity changes

Question 11

One example of one-shot inflation occurs when the SRAS curve shifts leftward.

Accepted Answer

A) True 
 B)False

Question 12

The money supply falls from $900 billion to $850 billion.According to the simple quantity theory of money,the price level will ___________ by __________ percent.

Accepted Answer

A)  rise; 5.6 
B)  fall; 5.6 
C)  rise; 6.2 
D)  fall; 6.2 
A)  rise; 5.6 
B)  fall; 5.6 
C)  rise; 6.2 
D)  fall; 6.2

Question 13

In order to turn the equation of exchange into a theory,assumptions must be made about the variables contained in the equation of exchange.

Accepted Answer

A) True 
 B)False

Question 14

The true cost of borrowing is the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 15

If V is constant,the rate of growth of M that is consistent with a stable price level is

Accepted Answer

A)  zero. 
B)  the rate of growth of PQ. 
C)  the rate of growth of Q. 
D)  the expected rate of inflation. 
E)  none of the above 
A)  zero. 
B)  the rate of growth of PQ. 
C)  the rate of growth of Q. 
D)  the expected rate of inflation. 
E)  none of the above

Question 16

The California gold rush resulted in

Accepted Answer

A)  an increase in the amount of money in circulation and higher prices throughout the country. 
B)  no change in the amount of money in circulation and higher prices throughout the country. 
C)  an increase in the amount of money in circulation and higher prices only in California. 
D)  no change in the amount of money in circulation and higher prices only in California. 
A)  an increase in the amount of money in circulation and higher prices throughout the country. 
B)  no change in the amount of money in circulation and higher prices throughout the country. 
C)  an increase in the amount of money in circulation and higher prices only in California. 
D)  no change in the amount of money in circulation and higher prices only in California.

Question 17

Which of the following statements is true?

Accepted Answer

A)  Monetarists believe that the government should be very involved in managing and directing the economy. 
B)  Monetarists believe that the economy is self-regulating. 
C)  There is very little difference between monetarist and Keynesian thought. 
D)  Monetarists hold that velocity is constant. 
E)  a and c 
A)  Monetarists believe that the government should be very involved in managing and directing the economy. 
B)  Monetarists believe that the economy is self-regulating. 
C)  There is very little difference between monetarist and Keynesian thought. 
D)  Monetarists hold that velocity is constant. 
E)  a and c

Question 18

According to the simple quantity theory of money in the AD-AS framework,the AD curve is

Accepted Answer

A)  vertical. 
B)  downward sloping. 
C)  horizontal. 
D)  upward sloping. 
A)  vertical. 
B)  downward sloping. 
C)  horizontal. 
D)  upward sloping.

Question 19

The increase in the interest rate due to a higher expected inflation rate is called the __________ effect.

Accepted Answer

A)  expectations 
B)  Fisher 
C)  liquidity 
D)  income 
E)  a or b 
A)  expectations 
B)  Fisher 
C)  liquidity 
D)  income 
E)  a or b

Question 20

The money supply falls from $1,200 billion to $1,152 billion.According to the simple quantity theory of money,the price level will decline by __________ percent.

Accepted Answer

A)  4.00 
B)  3.33 
C)  5.09 
D)  4.17 
A)  4.00 
B)  3.33 
C)  5.09 
D)  4.17

Exam 14: Wages,union,and Labor

The simple quantity theory of money predicts that the larger the percentage change in the money supply,the larger the percentage change in Real GDP.

-Refer to Exhibit 14-1.A continued increase in the price of oil,combined with Fed attempts to respond to these oil shocks by increasing aggregate demand,is likely to take the economy along which of the following paths?

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

The velocity of money is the __________ number of times a dollar is spent to buy final goods and services in a year.

Suppose the economy starts off producing Natural Real GDP.Next,aggregate supply rises,ceteris paribus.As a result,the price level falls in the short run.In the long run,when the economy has moved back to producing Natural Real GDP,the price level will be

According to monetarists,changes in velocity can

Can a one-time increase in the supply of money cause one-shot inflation?

Which of the following factors can change continually in such a way as to bring about continued increases in aggregate demand?

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

List and describe the four positions held by monetarists that help to explain the monetarists view of the economy.

One example of one-shot inflation occurs when the SRAS curve shifts leftward.

The money supply falls from $900 billion to $850 billion.According to the simple quantity theory of money,the price level will ___________ by __________ percent.

In order to turn the equation of exchange into a theory,assumptions must be made about the variables contained in the equation of exchange.

The true cost of borrowing is the nominal interest rate.

If V is constant,the rate of growth of M that is consistent with a stable price level is

The California gold rush resulted in

Which of the following statements is true?

According to the simple quantity theory of money in the AD-AS framework,the AD curve is

The increase in the interest rate due to a higher expected inflation rate is called the __________ effect.

The money supply falls from $1,200 billion to $1,152 billion.According to the simple quantity theory of money,the price level will decline by __________ percent.

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

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

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Stocks,bonds,futures,and Options

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The money supply falls from $900 billion to $850 billion.According to the simple quantity theory of money,the price level will _ by percent.