Exam 14: Money and the Economy

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 statements is true?

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.

The economy is initially in long-run equilibrium.The AD curve shifts to the right and the price level rises.Assuming that the economy is self-regulating,the SRAS curve will shift to the left and the price level will rise even further.If the price level now remains constant,what have we witnessed?

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

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

MV in the equation of exchange is also defined as

The assumption made about Real GDP in the simple quantity theory of money produces a ____________________ curve in the AD-AS version of the theory.

Monetarists believe

The expectations effect is the

If the money supply is $6,000,velocity is 5,and Real GDP is 10,000 units of output,then the price level is _____________.If the money supply doubled over a short time period to $12,000,the simple quantity theory of money would predict that _____________________.

If GDP is $12,000 and velocity is 4,the money supply is

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

What is the only factor that can continually increase in such a way as to bring about continued increases in aggregate demand,and thus bring about continued inflation? Give two reasons why government purchases cannot continually increase,and so cannot be the cause of continued inflation.

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 ______________________.

Exhibit 14-1 -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 simple quantity theory of money can be written as

One-shot inflation can originate

Exhibit 14-2 -Refer to Exhibit 14-2.The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7.Is this consistent with one-shot declines originating on the supply-side of the economy combined with continued increases in aggregate demand?

The spread (difference)between the yield on conventional bonds and the yield on indexed bonds with the same maturities is an indication of the expected inflation rate.