In the short run, the expansionary fiscal policy usually will

A. decrease the price level and increase real GDP.
B. increase real GDP and decrease the price level.
C. increase both real GDP and the price level.
D. decrease both real GDP and the price level.

Based on the quantity theory of money, if velocity is constant, inflation is likely to occur when:

A.The money supply grows at a faster rate than real GDP.

B.The money supply and inflation are unrelated.

C.The money supply grows at the same rate as real GDP.

D.The money supply grows at a slower rate than real GDP.

Which of the following will increase the demand for money? A. a fall in the aggregate price level B. an increase in real GDP C. technological advances D. open-market operations by the Fed E. a decrease in the interest rate

Because of the slope of the aggregate demand curve, we can say that _________.

A) a decrease in the price level leads to a lower level of real GDP demanded.
B) an increase in the price level leads to no change in the level of real GDP demanded.
C) a decrease in the price level leads to a higher level of real GDP demanded.
D) an increase in the price level leads to a higher level of real GDP demanded.

Use the IS-LM diagram to describe both the short-run effects and the long-run effects of the following changes on national income, the interest rate, the price level, consumption, investment, and real money balances.

An increase in the money supply,

Suppose that this year’s nominal GDP is $16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level five years ago. Using that index, we find that this year’s real GDP is$15 trillion. Given those numbers, we can conclude that the current value of the index is:

a. Higher than 100.

b. Lower than 100.

c. Still 100.

In the following examples, would the classical model of the price level be relevant?

There is a great deal of unemployment in the economy and no history of inflation.

Explain why you agree or disagree with each of the following assertions. a. The demand for money increases as the actual economy grows ($Y$ rises). As a result, households carry more cash on hand and the money supply grows. b. When prices increase, or when there is inflation, less people want to spend their money. Households desire to hold less money because inflation reduces the value of money. c. Interest rates will undoubtedly increase if the Fed purchases bonds on the open market when a recession is occurring.

Going from left to right on the aggregate demand curve, real GDP ________.

a. rises as price level falls
b. rises as price level rises
c. falls as price level falls
d. falls as price level rises

The real-balances effect on aggregate demand suggests that a:

A. Lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending
B. Lower price level will decrease the real value of many financial assets and therefore cause an increase in spending
C. Lower price level will increase the real value of many financial assets and therefore cause an increase in spending
D. Higher price levels will increase the real value of many financial assets and therefore cause an increase in spending

The Fed expands the money supply by $5$ percent.

Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run.

The only way Claudius could ascend to the throne of Denmark was through _______ ; he chose to poison his own brother, King Hamlet.

A 10% decrease in the money supply will change the aggregate price level in the long run by A. zero. B. less than 10%. C. 10%. D. 20%. E. more than 20%.

Which of the following is true regarding prices in an economy? I. An increase in the price level is called inflation. II. The level of prices doesn't matter. III. The rate of change in prices matters. A. I only B. II only C. III only D. II and III only E. I, II, and III