Question 1

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

Accepted Answer

A) the money supply. 
B) interest rates. 
C) the expected rate of inflation. 
D) a and c 
E) a,b and c 
A) the money supply. 
B) interest rates. 
C) the expected rate of inflation. 
D) a and c 
E) a,b and c

Question 2

Which of the following statements is false?

Accepted Answer

A) The exchange equation assumes that velocity is constant. 
B) Velocity is the average number of times a dollar is spent to buy final goods and services in a year. 
C) The simple quantity theory of money predicts that changes in the money supply lead to strictly proportional changes in the price level. 
D) In the simple quantity theory of money the aggregate supply curve is vertical. 
A) The exchange equation assumes that velocity is constant. 
B) Velocity is the average number of times a dollar is spent to buy final goods and services in a year. 
C) The simple quantity theory of money predicts that changes in the money supply lead to strictly proportional changes in the price level. 
D) In the simple quantity theory of money the aggregate supply curve is vertical.

Question 3

According to the simple quantity theory of money in the AD-AS framework,when the money supply decreases,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) no change;a fall 
A) no change;no change 
B) a rise;no change 
C) no change;a rise 
D) a rise;a fall 
E) no change;a fall

Question 4

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 5

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 6

In the equation of exchange,the money supply multiplied by velocity equals

Accepted Answer

A) GDP. 
B) the price level. 
C) the quantity of goods produced. 
D) the average number of times that a dollar is used to purchase a final good or service. 
A) GDP. 
B) the price level. 
C) the quantity of goods produced. 
D) the average number of times that a dollar is used to purchase a final good or service.

Question 7

Exhibit 14-1  
-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 8

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 9

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 10

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 11

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

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

If the Fed increases its open market purchases of government securities,it exerts a downward pressure on the interest rate.Such a phenomenon is usually referred to as the ___________________ effect.

Accepted Answer

A) income 
B) substitution 
C) open market 
D) liquidity 
E) expectations 
A) income 
B) substitution 
C) open market 
D) liquidity 
E) expectations

Question 14

Some economists argue that increases in government spending are not a likely source of continued inflation because

Accepted Answer

A) increases in government spending cause reductions in other spending components. 
B) government spending is not created by the Fed. 
C) increases in government spending can be financed by money creation. 
D) a and b 
E) a and c 
A) increases in government spending cause reductions in other spending components. 
B) government spending is not created by the Fed. 
C) increases in government spending can be financed by money creation. 
D) a and b 
E) a and c

Question 15

Grade inflation at colleges and universities is _________ to general price inflation in that ______________.

Accepted Answer

A) similar;both can be deceptive. 
B) not comparable;it is impossible for grades to be inflated. 
C) similar;grades tend to go up when prices are rising. 
D) not comparable;grades tend to fall while prices tend to rise. 
A) similar;both can be deceptive. 
B) not comparable;it is impossible for grades to be inflated. 
C) similar;grades tend to go up when prices are rising. 
D) not comparable;grades tend to fall while prices tend to rise.

Question 16

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 17

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 18

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 19

If Real GDP is $8,000,the money supply is $3,100,and velocity is 4,then the price level is

Accepted Answer

A) 1.92. 
B) 4.69. 
C) 1.55. 
D) 3.33. 
A) 1.92. 
B) 4.69. 
C) 1.55. 
D) 3.33.

Question 20

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.

Exam 14: Money and the Economy

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

Which of the following statements is false?

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

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

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

In the equation of exchange,the money supply multiplied by velocity equals

Exhibit 14-1 -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?

Real-world continued inflation is probably a result of continued

Which of the following variables is capable of continually increasing aggregate demand with no offsetting influence on any of the components of total spending?

Monetarists believe that velocity

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

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

If the Fed increases its open market purchases of government securities,it exerts a downward pressure on the interest rate.Such a phenomenon is usually referred to as the ___________________ effect.

Some economists argue that increases in government spending are not a likely source of continued inflation because

Grade inflation at colleges and universities is _________ to general price inflation in that ______________.

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 predicts that an increase in M of 5 percent will lead to

Continued inflation occurs

If Real GDP is $8,000,the money supply is $3,100,and velocity is 4,then the price level is

The California gold rush resulted in

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

The Federal Reserve System

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

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

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

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

Grade inflation at colleges and universities is _ to general price inflation in that ______.

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