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ch 12 Econ

Terms in this set (8)

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.
C
Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be
a.135
b. 132
c. 125
d. 121
A
Which of the following is correct?
a. If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
b. If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
c. If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right.
d. If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.
A
Monetary neutrality means that a change in the money supply
a. does not change real variables. Most economists think this is a good description of the economy in the short run and in the long run.
b. does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
c. does not change nominal variables. Most economists think this is a good description of the economy in the short-run and the long run.
d. does not change nominal variables. Most economists think this is a good description of the economy in the long run but not the short run.
B
The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?
a. The price level and velocity are both 8.
b. The price level and velocity are both 4.
C. The price level is 2 and velocity is 8.
D. The price level is 4 and velocity is 8.
D
Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply
a. increases the price level by more than 4%.
b.increases the price level by less than 4%.
c. increases the price level by 4%.
d. increases real GDP by 4%.
C
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.
b. People who had lent money at a fixed interest rate would feel poorer.
C. Prices would rise.
D. All are correct.
D
Norma receives an increase in her nominal income. She complains that the current inflation rate of six percent erodes the real purchasing power of her additional nominal income. This is true
a. only if the increase in her nominal income is less than six percent.
b. only if the increase in her nominal income is more than six percent.
c. since inflation always reduces purchasing power.
d. only if her real income increases.
A
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