What is the equation of exchange? Suppose that real GDP and velocity are constant. In this case, what effect will an increase in the quantity of money have?
What will be an ideal response?
The equation of exchange is that M × V = P × Y, where M is the quantity of money, V is the velocity of circulation, P is the price level, and Y is real GDP. If real GDP and velocity are constant, then an increase in the quantity of money will increase the price level.
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A beneficial oil-price shock increases labor demand. What happens to current employment and the real wage rate?
A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase.
A firm should use marginal analysis when making a price-output decision
a. True b. False Indicate whether the statement is true or false
Refer to Figure 2-18. Which of the following could result in a movement from point B to point Z?
a. a change in the price of a restaurant meal b. a change in the number of restaurant meals demanded c. a change in income d. Both a and b are correct.
Suppose your bank pays you 5 percent interest per year on your savings account. If prices increase by 5 percent per year over that time, approximately how much real value do you gain by keeping $100 in the bank for a year?
A. $0 B. $1 C. $3 D. $6