Question

The quantity theory of money asserts that:A. changes in nominal GDP are inversely related to changes in the velocity of money.B.changes in money supply are positively related to changes in the velocity of money.C.changes in the money supply are unrelated to changes in the price level.D.
changes in the output level are unrelated to changes in the price level.E.changes in the money supply are directly related to changes in nominal GDP.10 points   
QUESTION 2If M = quantity of money, V = velocity of money, P = price level, and Q = the quantity of output, then the equation of exchange will be defined as:A.MV = PQB.MQ = PVC.MP = VQD.MV = P/QE.MQ = V/P10 points   
QUESTION 3The velocity of money is:A.the purchasing power of money.B.the value of a dollar in relation to foreign currency.C.the average number of times each dollar is spent on final goods and services in a given year.D.the average length of time it takes for a dollar of income to be spent.E.the total amount of money that is in circulation for consumption spending.10 points   
QUESTION 4If a percentage decrease in money supply is followed by a proportional percentage decrease in prices and output, this means that:A.the velocity of money is constant.B.
the economy is in a recession.C.the velocity of money has fallen.D.real GDP is constant.E.the economy is not at maximum capacity10 points   
QUESTION 5Table 13.1Balance SheetAssetsLiabilitiesVault Cash$  1,150Checking Accounts$11,300Reserve Deposits$  1,650Savings Accounts$  3,200Loans$11,700Total Assets$14,500Total Liabilities$14,500Assume that this is the balance sheet of the only bank in this economy and that the money supply is entirely kept by the bank in either a checking or a savings account.
Refer to Table 13.1. Given a reserve requirement of 8 percent, what is the maximum potential increase in the money supply?A.$11,700B.$20,500C.$2,800D.$224E.$35,00010 points   
QUESTION 6The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.
Table 13.2
Balance Sheet of National BankAssetsLiabilitiesVault Cash$1,725Deposits$5,450Deposit in Fed$425  Loans$3,300  Total Assets$5,450Total Liabilities$5,450
Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.A.$1,605B.$1,180C.$545D.$5,450E.$2,15010 points   
QUESTION 7The process of buying financial assets to stimulate the economy when the central bank target interest rate is near or at zero and the interest rate cannot be lowered further is called:A.bond-trading.B.quantitative bidding.C.open market purchase.D.quantitative easing.E.open market sale.10 points   
QUESTION 8The supply of the U.S. dollar on the foreign exchange market is generated by:A.demand for U.S. exports.B.the U.S. demand for the products and financial assets of other countries.
C.the U.S. demand for domestic goods and services.D.foreign demand for U.S. products.E.foreign demand for U.S. financial assets.10 points   
QUESTION 9The supply curve of U.S. dollars in the foreign exchange market is:A.downward-sloping because it is negatively related to U.S. exports.B.downward-sloping because it is negatively related to U.S. imports.C.upward-sloping because it is positively related to U.S. exports.D.upward-sloping because it is positively related to U.S. imports.10 points   
QUESTION 10If interest rates decrease:A.the quantity of money demanded will increase.B.the money demand function will shift to the left.C.
the quantity of money demanded will not change.D.the money demand function will shift to the right.10 points   
QUESTION 11 the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.Figure 13.3
Refer to Figure 13.3. Other things equal, if real GDP is equal to $900 billion, then:
A.the money demand curve will be to the left of the one shown in the figure above.B.the money demand curve will be to the right of the one illustrated in Panel (A) of the figure.C.the quantity of money demanded will be less than $400 billion and can be illustrated by a downward movement along the money demand curve.D.the investment demand curve will be to the left of the one illustrated in Panel (A) of the figure.10 points   
QUESTION 12There is an inverse relationship between the interest rate and the quantity of money demanded. True False10 points   
QUESTION 13An outward shift of the money demand function indicates an increase in the market rate of interest and hence a decrease in the level of investment in the economy. True False10 points   
QUESTION 14If the aggregate supply curve is positively sloped, an increase in the money supply will result in an increase in both equilibrium national income and the equilibrium price level. True False10 points   
QUESTION 15The slope of the short-run Phillips curve is consistent with:A.the long-run trade-off between inflation and GDP.B.the short-run trade-off between the money supply and interest rates.C.the short-run trade-off between business productivity and wage contracts.D.the short-run trade-off between the unemployment rate and inflation.10 points   
QUESTION 16Consider a nation experiencing the relationship illustrated by the short-run Phillips curve. An increase in both unemployment and inflation in this nation over the next ten years can be explained by:A.a downward movement along the short-run Phillips curve.B.a series of outward shifts of the short-run Phillips curve.C.an upward movement along the short-run Phillips curve.D.
a complete change in the slope of the Phillips curve.10 points   
QUESTION 17n the short run, an expansionary monetary policy by the Fed would:A.reduce unemployment at the cost of higher inflation.B.reduce inflation at the cost of a rise in the natural rate of unemployment.C.reduce inflation and leave the natural unemployment rate unchanged.D.reduce both inflation and unemployment10 points   
QUESTION 18In the short run, a decline in aggregate demand would be associated with:A.an inward shift of the Phillips curve.B.an outward shift of the Phillips curve.C.an upward movement along the Phillips curve.D.a downward movement along the Phillips curve.10 points   
QUESTION 19The long-run aggregate supply curve at potential national income is analogous to:A.the short-run aggregate demand curve at potential national income.B.the long-run Phillips curve at the natural rate of unemployment.C.the long-run aggregate demand curve at each price level.D.the horizontal portion of the Phillips curve10 points   
QUESTION 20The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s.Figure 14.2

A.Refer to Figure 14.2. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?B.An outward shift of the aggregate demand curveC.A downward movement along the aggregate supply curveD.An upward movement along the aggregate demand curve10 points   
QUESTION 21Which of the following is most likely to increase the natural rate of unemployment?A.An increase in the age of the working populationB.A shift from service to manufacturing jobsC.An increase in the minimum wage rateD.A reduction in social security benefits10 points   
QUESTION 22The natural rate of unemployment is defined as the unemployment rate that exists in the absence of:A.structural unemployment.B.frictional unemployment.C.cyclical unemployment.D.seasonal unemployment.10 points   
QUESTION 23If the actual unemployment rate is below the natural rate of unemployment, then the actual inflation rate must exceed the expected inflation rate, and the economy will be operating along the short-run Phillips curve. True False10 points   
QUESTION 24The shape of the long-run Phillips curve suggests that over a long time horizon there is a magnified trade-off between the unemployment rate and inflation. True False10 points   
QUESTION 25A decline in aggregate demand is analogous to an upward movement along the short-run Phillips curve. True False10 points   
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