Question 1

The simple quantity theory of money assumes that

Accepted Answer

A) velocity and Real GDP are constant. 
B) only velocity is constant. 
C) only the money supply is constant. 
D) only the price level is constant. 
A) velocity and Real GDP are constant. 
B) only velocity is constant. 
C) only the money supply is constant. 
D) only the price level is constant.

Question 2

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 3

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 4

The chief difference between one-shot inflation and continued inflation is that

Accepted Answer

A) Keynesians believe all inflations are one-shot inflations and monetarists believe all inflations are continued inflations. 
B) one-shot inflation is long and continued inflation is short. 
C) one-shot inflation is a single increase in the price level and continued inflation is a sustained increase in the price level. 
D) monetarists believe all inflations are one-shot inflations and Keynesians believe all inflations are continued inflations. 
A) Keynesians believe all inflations are one-shot inflations and monetarists believe all inflations are continued inflations. 
B) one-shot inflation is long and continued inflation is short. 
C) one-shot inflation is a single increase in the price level and continued inflation is a sustained increase in the price level. 
D) monetarists believe all inflations are one-shot inflations and Keynesians believe all inflations are continued inflations.

Question 5

Changes in the money supply can affect

Accepted Answer

A) expected inflation rates. 
B) actual inflation rates. 
C) the supply of loans. 
D) a and b 
E) a,b and c 
A) expected inflation rates. 
B) actual inflation rates. 
C) the supply of loans. 
D) a and b 
E) a,b and c

Question 6

The simple quantity theory of money predicts that changes in

Accepted Answer

A) the money supply lead to strictly proportional changes in the price level. 
B) the money supply do not affect the price level. 
C) the price level lead to strictly proportional changes in velocity and GDP. 
D) velocity lead to nearly proportional changes in the money supply. 
A) the money supply lead to strictly proportional changes in the price level. 
B) the money supply do not affect the price level. 
C) the price level lead to strictly proportional changes in velocity and GDP. 
D) velocity lead to nearly proportional changes in the money supply.

Question 7

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 8

Which of the following statements is false?

Accepted Answer

A) Monetarists believe that the velocity of money is highly stable. 
B) Monetarists believe that the velocity of money is predictable. 
C) Monetarists believe that the economy will settle into long-run equilibrium at less than full employment output. 
D) Monetarists believe that output can be at less than full employment output in the short run. 
A) Monetarists believe that the velocity of money is highly stable. 
B) Monetarists believe that the velocity of money is predictable. 
C) Monetarists believe that the economy will settle into long-run equilibrium at less than full employment output. 
D) Monetarists believe that output can be at less than full employment output in the short run.

Question 9

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 10

According to monetarists,if the economy is initially in long-run equilibrium,an increase in the money supply will __________ the price level and Real GDP in the short run,and will __________ only __________ in the long run.

Accepted Answer

A) lower;lower;the price level 
B) raise;raise;Real GDP 
C) raise;lower;Real GDP 
D) raise;raise;the price level 
E) raise;raise;the unemployment rate 
A) lower;lower;the price level 
B) raise;raise;Real GDP 
C) raise;lower;Real GDP 
D) raise;raise;the price level 
E) raise;raise;the unemployment rate

Question 11

If the simple quantity theory of money predicts well,what would we expect to see (in the real world)?

Accepted Answer

A) changes in the money supply strongly correlated with changes in interest rates 
B) changes in the money supply strongly correlated with changes in inflation rates 
C) changes in Real GDP strongly correlated with changes in the money supply 
D) changes in velocity strongly correlated with changes in the money supply 
E) none of the above 
A) changes in the money supply strongly correlated with changes in interest rates 
B) changes in the money supply strongly correlated with changes in inflation rates 
C) changes in Real GDP strongly correlated with changes in the money supply 
D) changes in velocity strongly correlated with changes in the money supply 
E) none of the above

Question 12

In the equation of exchange,the average number of times a dollar is used to purchase a final good or service is the __________ of money.

Accepted Answer

A) turnover 
B) elasticity 
C) velocity 
D) transfer 
A) turnover 
B) elasticity 
C) velocity 
D) transfer

Question 13

Which of the following statements is true?

Accepted Answer

A) Velocity equals the money supply. 
B) GDP is larger than the money supply if velocity is greater than 1. 
C) The money supply must be equal to GDP. 
D) GDP is always twice the money supply. 
A) Velocity equals the money supply. 
B) GDP is larger than the money supply if velocity is greater than 1. 
C) The money supply must be equal to GDP. 
D) GDP is always twice the money supply.

Question 14

In the equation of exchange,the letter "V" stands for

Accepted Answer

A) variance. 
B) validity. 
C) volume. 
D) velocity. 
A) variance. 
B) validity. 
C) volume. 
D) velocity.

Question 15

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 16

Which of the following is consistent with the equation of exchange?

Accepted Answer

A) Total spending must equal the total sales revenues of business firms. 
B) The money supply multiplied by velocity must equal GDP. 
C) The money supply multiplied by velocity must equal the price level times Real GDP. 
D) a and b 
E) a,b and c 
A) Total spending must equal the total sales revenues of business firms. 
B) The money supply multiplied by velocity must equal GDP. 
C) The money supply multiplied by velocity must equal the price level times Real GDP. 
D) a and b 
E) a,b and c

Question 17

Explain in detail how the California gold rush contributed to rising prices in the early 1850's.

Accepted Answer

The discovery and mining of gold in Cali

Question 18

The equation of exchange is

Accepted Answer

A) an identity. 
B) a theory. 
C) an abstraction 
D) a hypothesis. 
E) a,b,and c 
A) an identity. 
B) a theory. 
C) an abstraction 
D) a hypothesis. 
E) a,b,and c

Question 19

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 20

In the equation of exchange,"Q" stands for

Accepted Answer

A) the interest rate. 
B) quality. 
C) GDP. 
D) Real GDP. 
A) the interest rate. 
B) quality. 
C) GDP. 
D) Real GDP.

Exam 14: Money and the Economy

The simple quantity theory of money assumes that

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.

Velocity equals GDP __________ the money supply.

The chief difference between one-shot inflation and continued inflation is that

Changes in the money supply can affect

The simple quantity theory of money predicts that changes in

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

Which of the following statements is false?

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.

According to monetarists,if the economy is initially in long-run equilibrium,an increase in the money supply will __________ the price level and Real GDP in the short run,and will __________ only __________ in the long run.

If the simple quantity theory of money predicts well,what would we expect to see (in the real world)?

In the equation of exchange,the average number of times a dollar is used to purchase a final good or service is the __________ of money.

Which of the following statements is true?

In the equation of exchange,the letter "V" stands for

In the equation of exchange,"PQ" stands for

Which of the following is consistent with the equation of exchange?

Explain in detail how the California gold rush contributed to rising prices in the early 1850's.

The equation of exchange is

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?

In the equation of exchange,"Q" stands for

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 increases,the result is in Real GDP and in the price level.

According to monetarists,if the economy is initially in long-run equilibrium,an increase in the money supply will the price level and Real GDP in the short run,and will only __ in the long run.