According to the quantity theory of money, a decrease in prices would be due to:
A. an increase in the production of output.
B. a decrease in the production of output.
C. an increase in the money supply.
D. a decrease in the money supply.
Answer: D
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At full employment, the expected inflation rate is
A) higher than the inflation rate. B) unrelated to the inflation rate. C) equal to the inflation rate. D) lower than the inflation rate. E) unknown.
When the Federal Reserve purchases a government bond from a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant
A) increase; increases B) increase; decreases C) decrease; increases D) decrease; decreases
One aspect of prospect theory is that people tend to
A) be very risk averse to large gains. B) be very risk averse to losses. C) love losses more than gains. D) hate gains regardless of potential losses.
In a particular year, if the price level rises by 4 percent and the nominal wage of workers rises by 6 percent, we can conclude that the real wage has: a. fallen by 2 percent
b. fallen by 10 percent. c. increased by 2 percent. d. increased by 10 percent. e. remained constant.