Answer the following statements true (T) or false (F)
1. The supply of money is inversely related to the level of total income and output.
2. The transactions approach to the equation of exchange can be expressed as MV = PQ.
3. The velocity of money is equal to PQ/M.
4. If M equals $40, V equals 16, and Q equals 16, then P equals $40.
5. If M triples, V remains the same, and Q doubles, then P rises.
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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Refer to Horizontal Merger. After the merger, producer's surplus is equal to
The following questions refer to the accompanying diagram, which shows the effects of a horizontal merger. Before the merger, the firm behaves competitively producing Q0 and charging P0. The merger lowers the firm's marginal cost and gives the firm enough market power to switch to the monopoly equilibrium.
a. area A + C + F.
b. area C + D + F + G.
c. area C + D + E - F - G.
d. area C + D.
Refer to Figure 17-1. What should the Federal Reserve do if it wants to move from point A to point B in the short-run Phillips curve depicted in the figure above?
A) lower taxes B) buy treasury bills C) lower the discount rate D) increase the money supply E) sell treasury bills
Which of the following industries has a marginal cost that is close to zero?
a. automobile b. aircraft c. software d. furniture
According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be
A) 8%. B) 6%. C) 4%. D) 2%.