If people hold onto some money as cash, rather than depositing it into banks:
A. this will not affect the size of the money multiplier.
B. the money multiplier will be smaller.
C. the money multiplier will be zero.
D. the money multiplier will be larger.
Ans: B. the money multiplier will be smaller.
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The "long run" is defined as a period of time long enough for the quantities of all of the inputs to production to vary
Indicate whether the statement is true or false
According to the quantity theory of money currently used by monetarists, assuming velocity is constant (at a value of 5), a 10 percent increase in the money supply will raise
a. nominal GDP by 50 percent. b. real GDP by 10 percent. c. nominal GDP by 10 percent. d. real GDP by 50 percent.
Empirical research suggests that the steepness of the aggregate supply curve depends on the
a. size of the multiplier. b. interest rate. c. level of wage rate. d. amount of excess capacity in the economy.
Opponents of tax reforms intended to raise saving argue that such reforms
a. favor those with high income, and that saving may not rise because of the substitution effect. b. favor those with high income, and that saving may not rise because of the income effect. c. favor those with low income, and that saving may not rise because of the substitution effect. d. favor those with low income, and that saving may not rise because of the income effect.