The quantity theory of money assumes that
A. velocity varies inversely with interest rates.
B. if velocity equals six, the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent.
C. changes in the money supply affect output but not prices.
D. changes in velocity are so small that velocity can be considered constant.
Answer: D
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Every society must deal with the problem of scarcity because:
a. people do not have enough money to buy everything they need. b. government levies heavy taxes on households and firms. c. human beings become satiated as consumption increases. d. human wants are nearly unlimited relative to the availability of resources. e. productive resources, technology, and labor are unlimited.
In a majority-rules democracy, economic thinking suggests that we should expect to see institutions and policies that
a. are short-sighted. b. take the long view, sacrificing current benefits to get larger future benefits. c. benefit the common citizen at the expense of narrow special interest groups which, after all, have fewer voters. d. are biased against income transfer programs, regardless of constitutional limits.
In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. The vertical intercept of the expenditure line is:
A. 990. B. 890. C. 900. D. 940.
When a tariff is imposed on an imported good, the prices of the similar products produced within the country also increase.
Answer the following statement true (T) or false (F)