Question 1

In the equation of exchange, velocity will tend to rise when:

Accepted Answer

A) ​the price level rises, other things being equal. 
B) ​real GDP rises, other things being equal. 
C) ​the money supply declines, other things being equal. 
D) ​all of the above. 
A) ​the price level rises, other things being equal. 
B) ​real GDP rises, other things being equal. 
C) ​the money supply declines, other things being equal. 
D) ​all of the above.

Question 2

To what extent should monetary policy be used to fine-tune the economy?

Accepted Answer

​As a fine-tuning strategy, it is unlike

Question 3

Velocity can be defined as:

Accepted Answer

A) ​the turnover rate of money 
B) ​the speed at which economic activity takes place. 
C) ​the speed at which multiplier effect takes place. 
D) ​the speed at which tax cuts are spent. 
A) ​the turnover rate of money 
B) ​the speed at which economic activity takes place. 
C) ​the speed at which multiplier effect takes place. 
D) ​the speed at which tax cuts are spent.

Question 4

If inflation is the major problem in the economy, which of the following would be an appropriate monetary policy response?​

Accepted Answer

A) ​decreasing reserve requirements 
B) ​increasing the discount rate 
C) ​buying government bonds 
D) ​none of the above 
A) ​decreasing reserve requirements 
B) ​increasing the discount rate 
C) ​buying government bonds 
D) ​none of the above

Question 5

Which of the following is false about a liquidity trap situation:

Accepted Answer

A) ​Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities. 
B) ​The Fed can lower both short term and long term interest rates by using quantitative easing. 
C) ​The Fed cannot easily reduce the fed funds interest rate. 
D) ​Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates. 
A) ​Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities. 
B) ​The Fed can lower both short term and long term interest rates by using quantitative easing. 
C) ​The Fed cannot easily reduce the fed funds interest rate. 
D) ​Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates.

Question 6

The equation of exchange states that:​

Accepted Answer

A) ​government spending = taxes plus the federal budget deficit. 
B) ​the reciprocal of the reserve requirement = the deposit expansion multiplier. 
C) ​the money supply times the velocity of money = the price level times the quantity of goods and services produced. 
D) ​the price level times the velocity of money = the money supply times the quantity of goods and services produced. 
A) ​government spending = taxes plus the federal budget deficit. 
B) ​the reciprocal of the reserve requirement = the deposit expansion multiplier. 
C) ​the money supply times the velocity of money = the price level times the quantity of goods and services produced. 
D) ​the price level times the velocity of money = the money supply times the quantity of goods and services produced.

Question 7

The implementation lag for monetary policy is _____ for monetary policy than fiscal policy; the lag before the full effects of monetary policy on inflation are felt is ____ than for its effects on real output and unemployment:

Accepted Answer

A) ​Longer, longer 
B) ​Longer; shorter 
C) ​Shorter; longer. 
D) ​Shorter; shorter 
A) ​Longer, longer 
B) ​Longer; shorter 
C) ​Shorter; longer. 
D) ​Shorter; shorter

Question 8

An increase in the supply of money would decrease the interest rate and increase aggregate demand, other things equal.

Accepted Answer

A) True 
 B)False

Question 9

Which among the following is the primary cause of hyperinflation?

Accepted Answer

A) ​decreased government purchases 
B) ​excessive money growth 
C) ​high interest rates 
D) ​high levels of taxation 
A) ​decreased government purchases 
B) ​excessive money growth 
C) ​high interest rates 
D) ​high levels of taxation

Question 10

Profitable investment is most effectively promoted when:

Accepted Answer

A) ​the money supply and price level are stable. 
B) ​inflation is rising rapidly. 
C) ​monetary policy is unanticipated. 
D) ​persistent inflation increases uncertainty. 
A) ​the money supply and price level are stable. 
B) ​inflation is rising rapidly. 
C) ​monetary policy is unanticipated. 
D) ​persistent inflation increases uncertainty.

Question 11

Higher rates of interest increase the opportunity cost of holding money balances.​

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a definition of velocity?

Accepted Answer

A) ​Velocity = value of final goods and services produced/money supply 
B) ​Velocity = real GDP/M 
C) ​Velocity = nominal GDP/real GDP 
D) ​Velocity = (P   Q)/(M   V) 
A) ​Velocity = value of final goods and services produced/money supply 
B) ​Velocity = real GDP/M 
C) ​Velocity = nominal GDP/real GDP 
D) ​Velocity = (P   Q)/(M   V)

Question 13

If V falls faster than M increases:

Accepted Answer

A) ​nominal GDP increases. 
B) ​nominal GDP decreases. 
C) ​nominal GDP stays the same. 
D) ​there is an indeterminate effect on nominal GDP. 
A) ​nominal GDP increases. 
B) ​nominal GDP decreases. 
C) ​nominal GDP stays the same. 
D) ​there is an indeterminate effect on nominal GDP.

Question 14

An increase in M or an increase in V, other things equal, would definitely increase:​

Accepted Answer

A) ​the price level. 
B) ​real GDP. 
C) ​nominal GDP. 
D) ​unemployment. 
A) ​the price level. 
B) ​real GDP. 
C) ​nominal GDP. 
D) ​unemployment.

Question 15

Which of the following is false?

Accepted Answer

A) ​The money supply times velocity equals the price level times real GDP. 
B) ​If individuals are writing lots of checks on their checking accounts and spending currency as fast as they receive it, velocity will tend to be high. 
C) ​The magnitude of velocity does not depend on the definition of money that is used. 
D) ​Velocity equals nominal GDP divided by the money supply. 
A) ​The money supply times velocity equals the price level times real GDP. 
B) ​If individuals are writing lots of checks on their checking accounts and spending currency as fast as they receive it, velocity will tend to be high. 
C) ​The magnitude of velocity does not depend on the definition of money that is used. 
D) ​Velocity equals nominal GDP divided by the money supply.

Question 16

Which of the following will tend to decrease the excess reserves of the commercial banking system?

Accepted Answer

A) ​The central bank buys bonds from the public. 
B) ​The central bank sells bonds to a commercial bank. 
C) ​The central bank reduces its discount rate. 
D) ​The central bank decreases the required reserve ratio. 
A) ​The central bank buys bonds from the public. 
B) ​The central bank sells bonds to a commercial bank. 
C) ​The central bank reduces its discount rate. 
D) ​The central bank decreases the required reserve ratio.

Question 17

In the equation of exchange, PQ represents:​

Accepted Answer

A) ​the dollar value of all final goods and services sold in a country in a given year. 
B) ​the price index times nominal GDP. 
C) ​real GDP. 
D) ​the price level times the velocity of money 
A) ​the dollar value of all final goods and services sold in a country in a given year. 
B) ​the price index times nominal GDP. 
C) ​real GDP. 
D) ​the price level times the velocity of money

Question 18

If policies of the Fed cause the money supply to increase, and velocity is held constant, the expected outcome would be:​

Accepted Answer

A) ​P   Q would increase, and the general price level would increase if Q remained constant. 
B) ​P   Q would decrease, and the general price level would decrease if Q remained constant. 
C) ​P   Q would decrease, and the general price level would increase if Q increased. 
D) ​insufficient information is available to arrive at a conclusion. 
A) ​P   Q would increase, and the general price level would increase if Q remained constant. 
B) ​P   Q would decrease, and the general price level would decrease if Q remained constant. 
C) ​P   Q would decrease, and the general price level would increase if Q increased. 
D) ​insufficient information is available to arrive at a conclusion.

Question 19

The demand for money will increase when either the price level or real GDP increases.

Accepted Answer

A) True 
 B)False

Question 20

When Fed policy is being used to offset a contractionary gap, which of interest rates, investment, net exports and aggregate demand moves in the opposite direction from the others?​

Accepted Answer

A) ​Interest rates. 
B) ​Investment. 
C) ​Net Exports. 
D) ​Aggregate demand.. 
A) ​Interest rates. 
B) ​Investment. 
C) ​Net Exports. 
D) ​Aggregate demand..

Exam 18: Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

In the equation of exchange, velocity will tend to rise when:

To what extent should monetary policy be used to fine-tune the economy?

Velocity can be defined as:

If inflation is the major problem in the economy, which of the following would be an appropriate monetary policy response?​

Which of the following is false about a liquidity trap situation:

The equation of exchange states that:​

The implementation lag for monetary policy is _____ for monetary policy than fiscal policy; the lag before the full effects of monetary policy on inflation are felt is ____ than for its effects on real output and unemployment:

An increase in the supply of money would decrease the interest rate and increase aggregate demand, other things equal.

Which among the following is the primary cause of hyperinflation?

Profitable investment is most effectively promoted when:

Higher rates of interest increase the opportunity cost of holding money balances.​

Which of the following is a definition of velocity?

If V falls faster than M increases:

An increase in M or an increase in V, other things equal, would definitely increase:​

Which of the following is false?

Which of the following will tend to decrease the excess reserves of the commercial banking system?

In the equation of exchange, PQ represents:​

If policies of the Fed cause the money supply to increase, and velocity is held constant, the expected outcome would be:​

The demand for money will increase when either the price level or real GDP increases.

When Fed policy is being used to offset a contractionary gap, which of interest rates, investment, net exports and aggregate demand moves in the opposite direction from the others?​

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

If inflation is the major problem in the economy, which of the following would be an appropriate monetary policy response?

The equation of exchange states that:

The implementation lag for monetary policy is _ for monetary policy than fiscal policy; the lag before the full effects of monetary policy on inflation are felt is than for its effects on real output and unemployment:

Higher rates of interest increase the opportunity cost of holding money balances.

An increase in M or an increase in V, other things equal, would definitely increase:

In the equation of exchange, PQ represents:

If policies of the Fed cause the money supply to increase, and velocity is held constant, the expected outcome would be:

When Fed policy is being used to offset a contractionary gap, which of interest rates, investment, net exports and aggregate demand moves in the opposite direction from the others?