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Terms in this set (36)According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then a. nominal GDP would be unchanged; real GDP would rise by 5 percent. b. nominal GDP would rise by 5 percent; real GDP would be unchanged. According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases a. inflation and nominal interest rates, but does not change real interest rates. a. inflation and nominal interest rates, but does not change real interest rates. Suppose that velocity rises while the money supply stays the same. It follows that a. the effects on P x Y are uncertain. b. P x Y must rise. The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments. a. The dollar amount you pay is a nominal value. The number of goods you give up is a real value. a. The dollar amount you pay is a nominal value. The number of goods you give up is a real value. Money demand depends on a. the price level but not the interest rate. c. the price level and the interest rate. The Fisher effect says that a. the nominal interest rate adjusts one for one with the inflation rate. a. the nominal interest rate adjusts one for one with the inflation rate. The Fisher effect is crucial for understanding changes over time in a. the unemployment rate. b. the nominal interest rate. When inflation rises, firms make a. less frequent price changes. This reduces their
menu costs. d. more frequent price changes. This raises their menu costs. Higher inflation a. causes firms to change prices more frequently and makes relative prices less variable. b. causes firms to change prices more frequently and makes relative prices more variable. According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases a. inflation and real interest rates, but does not change nominal interest rates. c. inflation and nominal interest rates, but does not change real interest rates. According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then a. both the price level and real GDP would be unchanged. c. the price level would rise by 5 percent and real GDP would be unchanged. Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to a. the classical dichotomy, but not the quantity theory of money. d. both the classical dichotomy and the quantity theory of money. The nominal interest rate is 6 percent and the real interest rate is 2 percent. What is the inflation rate? a. 4 percent. a. 4 percent. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. nar002-1.jpg Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then the equilibrium value of money is a. 2 and the equilibrium price level cannot be determined from the graph. c. 0.5 and the equilibrium price level is 2. On a Sunday morning, Tom sold 300 cups of coffee for a total of $750. a. Both the $750 and the 300 cups of coffee are real variables. d. The $750 is a nominal variable. The 300 cups of coffee is a real variable. Figure 30-1 Refer to Figure 30-1. If the current money supply is MS1, then a. there is no excess supply or excess demand if the value of money is 2. a. there is no excess supply or excess demand if the value of money is 2. Which of the following is correct? Inflation a. reduces the purchasing power of the average consumer. d. impedes financial markets in their role of allocating resources. You put money into an account and earn a real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 40 percent. What is your after-tax real rate of interest? a. 1 percent c. 2.2 percent According to the classical dichotomy, when the money supply doubles which of the following doubles? a. the price
level and real GDP b. the price level and nominal GDP The Fisher effect is crucial for understanding changes over time in a. the inflation rate. b. the nominal interest rate. The nominal interest rate is 4.5 percent and the inflation rate is 0.9 percent. What is the real interest rate? a. 4.1 percent c. 3.6 percent Most economists believe that monetary neutrality provides a. a good description of both the long run and the short run. b. a good description of the long run, but not the short run. Nominal GDP measures a. the total quantity of final goods and services produced. b. the dollar value of the economy's output of final goods and services. The price level falls if either a. money demand or money supply shifts rightward. d. money demand shifts rightward or money supply shifts leftward. Based on the quantity equation, if M = 3,000, P = 2, and Y = 4,500, then V = a. 1.33. c. 3. Shoeleather costs arise when higher inflation rates induce people to a. hold less money. a. hold less money. The inflation tax a. transfers wealth from the government to households. c. is a tax on everyone who holds money. According to the classical dichotomy, which of the following increases when the money supply increases? a. the real interest rate d. None of the above increases. According to the classical dichotomy, when the money supply doubles, which of the following also doubles? a. the price level d. All of the above are correct. Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. nar002-1.jpg Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then a. when the
money market is in equilibrium, one dollar purchases one-half of a basket of goods and services. d. All of the above are correct. Figure 30-1 Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then a. the quantity of money supplied is greater than the quantity demanded; the price level will fall. d. the quantity of money supplied is greater than the quantity demanded; the price level will rise Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen? a. People who held money would feel poorer. d. All of the above are correct. Money demand refers to a. how much currency the Federal Reserve decides to print. d. how much wealth people want to hold in liquid form. Based on the quantity equation, if M = 150, V = 4, and Y = 200, then P = a. 2. d. 3. Higher inflation a. causes firms to change prices more frequently and makes relative prices more variable. a. causes firms to change prices more frequently and makes relative prices more variable. Shoeleather cost refers to a. the tendency to expend more effort searching for the lowest price when inflation is high. d. resources used to maintain lower money holdings when inflation is high. Recommended textbook solutionsKrugman's Economics for AP2nd EditionDavid Anderson, Margaret Ray 1,042 solutions Krugman's Economics for AP2nd EditionDavid Anderson, Margaret Ray 1,000 solutions Principles of Economics2nd EditionDavid Shapiro, Steven Greenlaw Principles of Microeconomics1st EditionOpenStax, Steven Greenlaw, Timothy Taylor 713 solutions Sets with similar termsMacro Economics chapter 1727 terms brianne_maghan chapter 3030 terms liammurphy57 ECON 1040 CH 1237 terms matthew_hicks29 Sets found in the same folderEconomics- Deflation and Disinflation3 terms Chris_WeatheriltPLUS Chapter 15 - Lori116 terms loribivins macro ch 1722 terms spredmore Chapter 17 Problems100 terms iluttway18 Other sets by this creatorPR Principles Exam 123 terms mollie_bond7 Ethics in Journalism Test 2 Review21 terms mollie_bond7 Ethics in Journalism Exam #241 terms mollie_bond7 Indian Americans Vocab Quiz16 terms mollie_bond7 Verified questions
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ECONOMICS Explain why a financial investor in stocks cannot earn high capital gains simply by buying companies with a demonstrated record of high profits. Verified answer
ECONOMICS In the United States, the federal government and local governments provide many kinds of welfare assistance to the poor. Some people argue that this aid is necessary to help reduce poverty. Others believe that providing welfare is not an appropriate role for government, and that private organizations can do a better job of helping the poor. Some also feel that government aid makes people less able and willing to earn a living independently. Document A. "Voluntary charities and organizations, such as friendly societies that devoted themselves to helping those in need, flourished in the days before the welfare state turned charity into a government function .... Today, government welfare programs have supplemented the old-style private programs ... Releasing the charitable impulses of the American people by freeing them from the excessive tax burden so they can devote more of their resources to charity, is a moral and constitutional means of helping the needy." According to Document A, what does Representative Ron Paul believe would be a better alternative to federal welfare payments to the poor? A. local government welfare programs. B. private charities. C. state government welfare programs. D. ignoring poverty. Verified answer
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