The Fisherian version of the quantity theory equation is
a. MV = Py. b y = c + i + g
c. M = kPy.
d. s = i + (g – t).
A
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An open-market sale of Treasury bills by the Fed not only reduces the money supply but also
A. Lowers T-bill prices and raises interest rates. B. Drives up T-bill prices and pushes down interest rates. C. Lowers T-bill prices and pushes down interest rates D. None of these.
You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:
A. the demand for teachers in the inner-city school district is too low. B. the wage for teachers in that district is higher than the wage in other districts. C. there is an excess supply of teachers in other districts. D. the wage for teachers in that district is lower than the equilibrium wage.
If the Fed sells $10 million in bonds to a bank, and the required reserve ratio is 20 percent, then the banking system can:
A. decrease the money supply by up to $10 million. B. decrease the money supply by up to $40 million. C. decrease the money supply by up to $50 million. D. increase the money supply by up to $2 million.
The overall boost to economic activity that results from a government spending increase is called the
A. multiplier effect. B. economic effect. C. butterfly effect. D. aggregate demand effect.