Question 1

One-shot inflation can result from an increase in aggregate demand or an increase in aggregate supply.

Accepted Answer

A) True 
 B)False

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

According to the simple quantity theory of money,an increase in the money supply will shift the __________ curve to the right and raise __________.

Accepted Answer

A) AD;Real GDP 
B) AS;the price level 
C) AD;the price level 
D) AS;Real GDP 
E) none of the above 
A) AD;Real GDP 
B) AS;the price level 
C) AD;the price level 
D) AS;Real GDP 
E) none of the above

Question 4

According to the equation of exchange,if GDP equals $4 trillion and the money supply equals $1 trillion,the velocity of money

Accepted Answer

A) must be 0.25. 
B) must be 4. 
C) must be 0.25 trillion. 
D) must be 4 trillion. 
E) cannot be determined without knowing what the price level is. 
A) must be 0.25. 
B) must be 4. 
C) must be 0.25 trillion. 
D) must be 4 trillion. 
E) cannot be determined without knowing what the price level is.

Question 5

A decrease in the interest rate due to an increase in the supply of loanable funds is referred to as the __________ effect.

Accepted Answer

A) expectations 
B) liquidity 
C) income 
D) a and c 
E) a,b and c 
A) expectations 
B) liquidity 
C) income 
D) a and c 
E) a,b and c

Question 6

Monetarists believe that

Accepted Answer

A) velocity changes in a predictable way. 
B) aggregate supply depends on the money supply and velocity. 
C) the SRAS curve is upward sloping. 
D) a and c 
E) a,b and c 
A) velocity changes in a predictable way. 
B) aggregate supply depends on the money supply and velocity. 
C) the SRAS curve is upward sloping. 
D) a and c 
E) a,b and c

Question 7

If V is constant,the rate of growth of M that is consistent with a stable price level is

Accepted Answer

A) zero. 
B) the rate of growth of PQ. 
C) the rate of growth of Q. 
D) the expected rate of inflation. 
E) none of the above 
A) zero. 
B) the rate of growth of PQ. 
C) the rate of growth of Q. 
D) the expected rate of inflation. 
E) none of the above

Question 8

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 9

Which of the following statements is true?

Accepted Answer

A) Nominal interest rate = real interest rate - expected inflation rate. 
B) Nominal interest rate = real interest rate + expected inflation rate. 
C) Real interest rate = nominal interest rate + expected inflation rate. 
D) Expected inflation rate = nominal interest rate + real interest rate. 
E) Expected inflation rate = real interest rate - nominal interest rate. 
A) Nominal interest rate = real interest rate - expected inflation rate. 
B) Nominal interest rate = real interest rate + expected inflation rate. 
C) Real interest rate = nominal interest rate + expected inflation rate. 
D) Expected inflation rate = nominal interest rate + real interest rate. 
E) Expected inflation rate = real interest rate - nominal interest rate.

Question 10

In the monetarist version of the AD-AS framework,an increase in the money supply 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 11

Which of the following statements is true?

Accepted Answer

A) To a large degree,Keynesians focus on the spending components of total expenditures when they seek to understand what determines GDP;monetarists focus on the money supply and velocity when their objective is the same. 
B) To a large degree,monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;Keynesians focus on the money supply and velocity when their objective is the same. 
C) Both Keynesians and monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;neither group focuses on the money supply and velocity. 
D) Neither Keynesians nor monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;both focus on the money supply and velocity. 
A) To a large degree,Keynesians focus on the spending components of total expenditures when they seek to understand what determines GDP;monetarists focus on the money supply and velocity when their objective is the same. 
B) To a large degree,monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;Keynesians focus on the money supply and velocity when their objective is the same. 
C) Both Keynesians and monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;neither group focuses on the money supply and velocity. 
D) Neither Keynesians nor monetarists focus on the spending components of total expenditures when they seek to understand what determines GDP;both focus on the money supply and velocity.

Question 12

The increase in the interest rate due to a higher expected inflation rate is called the __________ effect.

Accepted Answer

A) expectations 
B) Fisher 
C) liquidity 
D) income 
E) a or b 
A) expectations 
B) Fisher 
C) liquidity 
D) income 
E) a or b

Question 13

Which of the following factors can change continually in such a way as to bring about continued increases in aggregate demand?

Accepted Answer

A) autonomous consumption 
B) autonomous investment 
C) government spending 
D) the money supply 
E) all of the above 
A) autonomous consumption 
B) autonomous investment 
C) government spending 
D) the money supply 
E) all of the above

Question 14

According to monetarists,changes in velocity can

Accepted Answer

A) lower GDP 
B) raise GDP 
C) shift the SRAS,but not the LRAS 
D) a and b 
E) a,b and c 
A) lower GDP 
B) raise GDP 
C) shift the SRAS,but not the LRAS 
D) a and b 
E) a,b and c

Question 15

If M = $5,000,P = $20,and Q = 2,000,then V is

Accepted Answer

A) 2.0. 
B) 4.0. 
C) 5.0 
D) 6.0 
E) 8.0 
A) 2.0. 
B) 4.0. 
C) 5.0 
D) 6.0 
E) 8.0

Question 16

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 17

In the monetarist version of the AD-AS framework,starting from long-run equilibrium,a decrease in velocity produces

Accepted Answer

A) no change in Real GDP in the short run or the long run. 
B) a rise in Real GDP in both the short run and the long run. 
C) a fall in Real GDP in both the short run and the long run. 
D) a fall in Real GDP in the short run,but not in the long run. 
E) no change in Real GDP in the short run,but a rise in the long run. 
A) no change in Real GDP in the short run or the long run. 
B) a rise in Real GDP in both the short run and the long run. 
C) a fall in Real GDP in both the short run and the long run. 
D) a fall in Real GDP in the short run,but not in the long run. 
E) no change in Real GDP in the short run,but a rise in the long run.

Question 18

Exhibit 14-1  
-Refer to Exhibit 14-1.A continued increase in the price of oil,combined with Fed attempts to respond to these oil shocks by increasing aggregate demand,is likely to take the economy along which of the following paths?

Accepted Answer

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

Question 19

Describe the difference between the simple quantity theory of money and the equation of exchange.

Accepted Answer

The equation of exchange is an identity

Question 20

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

Exam 14: Money and the Economy

One-shot inflation can result from an increase in aggregate demand or an increase in aggregate supply.

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

According to the simple quantity theory of money,an increase in the money supply will shift the __________ curve to the right and raise __________.

According to the equation of exchange,if GDP equals $4 trillion and the money supply equals $1 trillion,the velocity of money

A decrease in the interest rate due to an increase in the supply of loanable funds is referred to as the __________ effect.

Monetarists believe that

If V is constant,the rate of growth of M that is consistent with a stable price level is

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

Which of the following statements is true?

In the monetarist version of the AD-AS framework,an increase in the money supply produces a __________ shift of the __________ curve.

Which of the following statements is true?

The increase in the interest rate due to a higher expected inflation rate is called the __________ effect.

Which of the following factors can change continually in such a way as to bring about continued increases in aggregate demand?

According to monetarists,changes in velocity can

If M = $5,000,P = $20,and Q = 2,000,then V is

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

In the monetarist version of the AD-AS framework,starting from long-run equilibrium,a decrease in velocity produces

Exhibit 14-1 -Refer to Exhibit 14-1.A continued increase in the price of oil,combined with Fed attempts to respond to these oil shocks by increasing aggregate demand,is likely to take the economy along which of the following paths?

Describe the difference between the simple quantity theory of money and the equation of exchange.

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

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,an increase in the money supply will shift the curve to the right and raise .

In the monetarist version of the AD-AS framework,an increase in the money supply produces a shift of the curve.