The quantity theory of money argues that, in the long run, the percentage change in money will create an equal percentage change in
A) velocity.
B) real GDP.
C) potential GDP.
D) the price level.
D
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Unanticipated inflation occurs when
A) everyone knows perfectly the true rate of inflation. B) the actual inflation rate differs from the anticipated inflation rate. C) the inflation rate is zero. D) there is no change in the purchasing power of money.
When the money supply decreases, other things being equal,
a. real interest rates fall and investment spending rises. b. real interest rates fall and investment spending falls. c. real interest rates rise and investment spending falls. d. real interest rates rise and investment spending rises.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If you do not use the frequent-flyer coupon to fly to Miami, should you go to Miami?
A. Yes, your benefit is equal to your cost. B. No, because there are no benefits in the trip. C. Yes, your benefit is more than your cost. D. No, your benefit is less than your cost.
During a contraction,
A) higher income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. B) higher income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit. C) lower income tax revenues tend to automatically increase a budget deficit or reduce a budget surplus. D) lower income tax revenues tend to automatically increase a budget surplus or reduce a budget deficit.