Question 1

Monetarists believe that velocity

Accepted Answer

A)  is constant. 
B)  changes erratically. 
C)  and the money supply always have an inverse relationship. 
D)  changes in a way that can be understood and predicted. 
A)  is constant. 
B)  changes erratically. 
C)  and the money supply always have an inverse relationship. 
D)  changes in a way that can be understood and predicted.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

In the monetarist version of the AD-AS framework,a decrease in velocity produces a __________ shift of the __________ curve.

Accepted Answer

A)  rightward; AD 
B)  rightward; SRAS 
C)  leftward; AD 
D)  leftward; SRAS 
A)  rightward; AD 
B)  rightward; SRAS 
C)  leftward; AD 
D)  leftward; SRAS

Question 4

The simple quantity theory of money can be written as

Accepted Answer

A)  P = MV/Q. 
B)  MV = Q/P. 
C)  PM = VQ. 
D)  Q = PMV. 
E)  all of the above 
A)  P = MV/Q. 
B)  MV = Q/P. 
C)  PM = VQ. 
D)  Q = PMV. 
E)  all of the above

Question 5

Describe the expectations (or Fisher)effect.

Accepted Answer

The expectations effect (or Fisher effec

Question 6

According to the simple quantity theory of money,if the money supply falls by 20 percent,

Accepted Answer

A)  the price level will fall by 20 percent. 
B)  Real GDP will rise by less than 20 percent. 
C)  GDP will fall by 20 percent. 
D)  velocity will rise. 
E)  a and c 
A)  the price level will fall by 20 percent. 
B)  Real GDP will rise by less than 20 percent. 
C)  GDP will fall by 20 percent. 
D)  velocity will rise. 
E)  a and c

Question 7

Based upon the equation of exchange,which of the following can cause an increase in the price level?

Accepted Answer

A)  a decrease in velocity 
B)  a decrease in the money supply 
C)  an increase in Real GDP 
D)  an increase in the money supply 
E)  c and d 
A)  a decrease in velocity 
B)  a decrease in the money supply 
C)  an increase in Real GDP 
D)  an increase in the money supply 
E)  c and d

Question 8

According to the simple quantity theory of money in the AD-AS framework,when the money supply increases,the result is __________ in Real GDP and __________ in the price level.

Accepted Answer

A)  no change; no change 
B)  a rise; no change 
C)  no change; a rise 
D)  a rise; a fall 
E)  a fall; a rise 
A)  no change; no change 
B)  a rise; no change 
C)  no change; a rise 
D)  a rise; a fall 
E)  a fall; a rise

Question 9

The aggregate supply curve in the short run is vertical in __________ version of the AD-AS framework.

Accepted Answer

A)  the simple quantity theory of money 
B)  the monetarist 
C)  both the simple quantity theory of money and the monetarist 
D)  neither the simple quantity theory of money nor the monetarist 
A)  the simple quantity theory of money 
B)  the monetarist 
C)  both the simple quantity theory of money and the monetarist 
D)  neither the simple quantity theory of money nor the monetarist

Question 10

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 11

Real estate in San Francisco that sold for $16 before gold was discovered in California was valued at $4,500 eighteen months later,as a result of the gold rush.

Accepted Answer

A) True 
 B)False

Question 12

Both the monetarist view of the economy and the simple quantity theory of money hold that velocity is constant.

Accepted Answer

A) True 
 B)False

Question 13

The expectations effect is the

Accepted Answer

A)  increase in the interest rate brought on by an expected increase in Real GDP. 
B)  increase in the interest rate due to a higher expected inflation rate. 
C)  decrease in the interest rate due to an expected increase in the supply of loanable funds. 
D)  idea that people form their expectations of inflation by considering all available information about past,present,and future inflation. 
E)  idea that people form their expectations of inflation by considering only information about past inflation experience. 
A)  increase in the interest rate brought on by an expected increase in Real GDP. 
B)  increase in the interest rate due to a higher expected inflation rate. 
C)  decrease in the interest rate due to an expected increase in the supply of loanable funds. 
D)  idea that people form their expectations of inflation by considering all available information about past,present,and future inflation. 
E)  idea that people form their expectations of inflation by considering only information about past inflation experience.

Question 14

Suppose the Fed buys government securities from the public.The liquidity effect of this is that the interest rate will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  any of the above are possible 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  any of the above are possible

Question 15

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 16

Based upon the equation of exchange,which of the following (ceteris paribus)is most likely to bring about inflation?

Accepted Answer

A)  An increase in the money supply. 
B)  A decrease in velocity. 
C)  An increase in Real GDP. 
D)  a and b 
E)  a and c 
A)  An increase in the money supply. 
B)  A decrease in velocity. 
C)  An increase in Real GDP. 
D)  a and b 
E)  a and c

Question 17

Between 1890 and 1914,the gold stock of the world _______________ and world prices (in general)

Accepted Answer

A)  doubled; increased. 
B)  tripled; increased. 
C)  rose by 50%; increased. 
D)  doubled; decreased. 
E)  tripled; decreased. 
A)  doubled; increased. 
B)  tripled; increased. 
C)  rose by 50%; increased. 
D)  doubled; decreased. 
E)  tripled; decreased.

Question 18

According to monetarists,an increase in the money supply will raise Real GDP in the long run,but not in the short run.

Accepted Answer

A) True 
 B)False

Question 19

-Refer to Exhibit 14-1.What sequence of points shows the short- and long-run consequences of a rise 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 20

According to the equation of exchange,if Real GDP is $3 trillion and the money supply is $0.5 trillion,then velocity

Accepted Answer

A)  must be 6. 
B)  must be 1/6. 
C)  must be 4 trillion. 
D)  must be 1/4 trillion. 
E)  cannot be determined without knowing what the price level is. 
A)  must be 6. 
B)  must be 1/6. 
C)  must be 4 trillion. 
D)  must be 1/4 trillion. 
E)  cannot be determined without knowing what the price level is.

Exam 14: Wages,union,and Labor

Monetarists believe that velocity

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

In the monetarist version of the AD-AS framework,a decrease in velocity produces a __________ shift of the __________ curve.

The simple quantity theory of money can be written as

Describe the expectations (or Fisher)effect.

According to the simple quantity theory of money,if the money supply falls by 20 percent,

Based upon the equation of exchange,which of the following can cause an increase in the price level?

According to the simple quantity theory of money in the AD-AS framework,when the money supply increases,the result is __________ in Real GDP and __________ in the price level.

The aggregate supply curve in the short run is vertical in __________ version of the AD-AS framework.

In the equation of exchange,"PQ" stands for

Real estate in San Francisco that sold for $16 before gold was discovered in California was valued at $4,500 eighteen months later,as a result of the gold rush.

Both the monetarist view of the economy and the simple quantity theory of money hold that velocity is constant.

The expectations effect is the

Suppose the Fed buys government securities from the public.The liquidity effect of this is that the interest rate will

Monetarists believe

Based upon the equation of exchange,which of the following (ceteris paribus)is most likely to bring about inflation?

Between 1890 and 1914,the gold stock of the world _______________ and world prices (in general)

According to monetarists,an increase in the money supply will raise Real GDP in the long run,but not in the short run.

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

According to the equation of exchange,if Real GDP is $3 trillion and the money supply is $0.5 trillion,then velocity

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

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Monopolistic Competition, oligopoly, and Game Theory

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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

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

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In the monetarist version of the AD-AS framework,a decrease in velocity produces a shift of the curve.

According to the simple quantity theory of money in the AD-AS framework,when the money supply increases,the result is in Real GDP and in the price level.