Question 1

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 2

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.E) A) and B)
F) None of the above

Question 3

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 4

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.E) B) and C)
F) A) and B)

Question 5

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 cF) A) and B)
G) A) and D)

Question 6

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 cF) A) and B)
G) A) and D)

Question 7

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.E) A) and C)
F) A) and D)

Question 8

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 cF) All of the above
G) A) and C)

Question 9

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.E) None of the above
F) A) and B)

Question 10

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.F) B) and C)
G) A) and B)

Question 11

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.E) C) and D)
F) None of the above

Question 12

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;SRASE) All of the above
F) A) and D)

Question 13

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.E) B) and D)
F) A) and C)

Question 14

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)  expectationsF) A) and C)
G) A) and D)

Question 15

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.E) B) and C)
F) A) and D)

Question 16

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.E) A) and D)
F) All of the above

Question 17

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-CF) B) and E)
G) A) and D)

Question 18

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 fallF) A) and B)
G) B) and D)

Question 19

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.F) All of the above
G) A) and D)

Question 20

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 rateF) A) and E)
G) A) and D)

Exam 14: Money and the Economy

Real-world continued inflation is probably a result of continued

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The California gold rush resulted in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The simple quantity theory of money predicts that an increase in M of 5 percent will lead to

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Continued inflation occurs

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedMonetarists assume that velocity changes...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Monetarists believe that velocity

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Which of the following statements is false?

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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?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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Monetarists assume that velocity changes...
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Grade inflation at colleges and universities is _ to general price inflation in that ______.

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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.

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