Question 1

If Real GDP is $7,000,the money supply is $5,600,and the price level is 4,then velocity is

Accepted Answer

A)  2.50. 
B)  3.33. 
C)  4.00. 
D)  5.00. 
E)  none of the above 
A)  2.50. 
B)  3.33. 
C)  4.00. 
D)  5.00. 
E)  none of the above

Question 2

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

Question 3

If the money supply is $700,velocity is 5,then in the equation of exchange,PQ is

Accepted Answer

A)  $705. 
B)  $140. 
C)  $1,400. 
D)  $3,500. 
E)  $350. 
A)  $705. 
B)  $140. 
C)  $1,400. 
D)  $3,500. 
E)  $350.

Question 4

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 5

Real-world continued inflation is probably a result of continued

Accepted Answer

A)  increases in aggregate demand. 
B)  decreases in aggregate demand. 
C)  increases in aggregate supply. 
D)  decreases in aggregate supply. 
A)  increases in aggregate demand. 
B)  decreases in aggregate demand. 
C)  increases in aggregate supply. 
D)  decreases in aggregate supply.

Question 6

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 7

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 8

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 9

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 10

The simple quantity theory of money predicts that an increase in M of 5 percent will lead to

Accepted Answer

A)  an increase in P of 5 percent. 
B)  an increase in P of less than 5 percent. 
C)  an increase in P of more than 5 percent. 
D)  a decrease in P of 5 percent. 
E)  a decrease in P of more than 5 percent. 
A)  an increase in P of 5 percent. 
B)  an increase in P of less than 5 percent. 
C)  an increase in P of more than 5 percent. 
D)  a decrease in P of 5 percent. 
E)  a decrease in P of more than 5 percent.

Question 11

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 12

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 13

The aggregate supply curve is depicted as vertical in the simple quantity theory of money.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Suppose we are at a long-run equilibrium point in an AD-AS model.Then the money supply increases.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 rises; in the monetarist version,it does not. 
C)  In the monetarist version,the price level falls; in the SQTM version,it does not. 
D)  In the monetarist version,the Real GDP rises; 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 rises; in the monetarist version,it does not. 
C)  In the monetarist version,the price level falls; in the SQTM version,it does not. 
D)  In the monetarist version,the Real GDP rises; in the SQTM version,it does not. 
E)  In the SQTM version,Real GDP falls; in the monetarist version,it does not.

Question 16

Between 1890 and 1914,the gold stock of the world doubled,but world prices fell during this time.

Accepted Answer

A) True 
 B)False

Question 17

-Refer to Exhibit 14-1.A continued increase in the money supply by the Fed is likely to take the economy along which of the following paths?

Accepted Answer

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

Question 18

If the nominal interest rate is 7 percent and the expected inflation rate is 2 percent,the real interest rate is

Accepted Answer

A)  3 percent. 
B)  5 percent. 
C)  4 percent. 
D)  1.50 percent. 
E)  0.25 percent. 
A)  3 percent. 
B)  5 percent. 
C)  4 percent. 
D)  1.50 percent. 
E)  0.25 percent.

Question 19

In the equation of exchange,GDP divided by the money supply is equal to

Accepted Answer

A)  M. 
B)  V. 
C)  P. 
D)  Q. 
A)  M. 
B)  V. 
C)  P. 
D)  Q.

Question 20

In a country in which the government uses price controls to attempt to control inflation,nonmoney rationing devices will be needed to resolve shortages.

Accepted Answer

A) True 
 B)False

Exam 14: Wages,union,and Labor

If Real GDP is $7,000,the money supply is $5,600,and the price level is 4,then velocity is

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

If the money supply is $700,velocity is 5,then in the equation of exchange,PQ is

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

Real-world continued inflation is probably a result of continued

Velocity equals GDP __________ the money supply.

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

A monetarist would argue that

The simple quantity theory of money predicts that an increase in M of 5 percent will lead to

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

The aggregate supply curve is depicted as vertical in the simple quantity theory of money.

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?

Suppose we are at a long-run equilibrium point in an AD-AS model.Then the money supply increases.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?

Between 1890 and 1914,the gold stock of the world doubled,but world prices fell during this time.

-Refer to Exhibit 14-1.A continued increase in the money supply by the Fed is likely to take the economy along which of the following paths?

If the nominal interest rate is 7 percent and the expected inflation rate is 2 percent,the real interest rate is

In the equation of exchange,GDP divided by the money supply is equal to

In a country in which the government uses price controls to attempt to control inflation,nonmoney rationing devices will be needed to resolve shortages.

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

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

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

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 _________.