In the long run, an increase in aggregate demand will lead to
A. A higher price level and an increase in real GDP.
B. A decrease in real GDP.
C. A higher price level only.
D. An increase in real GDP only.
Answer: C
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Vault cash is equal to $8 million, deposits by depository institutions at the central bank are $2 million, the monetary base is $40 million, and bank deposits are $90 million. The money multiplier is equal to
A) 2.5. B) 3.0. C) 4.0. D) 5.0.
Refer to the above figure. A price ceiling of $20 results in
A) a shortage of 100 units. B) a shortage of 200 units. C) a surplus of 100 units. D) a surplus of 200 units.
If the Fed wanted to reduce the federal funds interest rate, it might: a. increase the discount rate
b. increase the required reserve ratio. c. buy government securities. d. sell government securities.
Being penalized via taxes for making more money in dollars even though your purchasing power hasn't changed at all is called:
A. shoe-leather costs. B. menu costs. C. the velocity of inflation. D. tax distortion.