Use the equation of exchange to explain the impact of an increase in the money supply if velocity and output are stable.
What will be an ideal response?
The equation of exchange states that the money supply times velocity (the rate at which money changes hands) equals the level of aggregate spending or price level times real output (MV=PQ). Monetarists believe that velocity and the quantity of real output are stable, which means that an increase in the money supply results in an increase in prices.
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An increase in the demand for loanable funds will occur if there is
A) an increase in the real interest rate. B) an increase in the nominal interest rate accompanied by an equal increase in inflation. C) a decrease in the real interest rate. D) an increase in expected profits from firm investment projects.
Which of the following is one of the basic questions used by economists to break down problems?
A. What are the wants and constraints of those involved? B. How will individuals feel about the change? C. Why has the market failed? D. Economists don't ask any of these questions.
Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium
a. True b. False Indicate whether the statement is true or false
Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that
a. Sue's productivity is higher than Mary's. b. Mary's productivity is higher than Sue's. c. Sue's income per hour will be higher than Mary's. d. Sue's income per day will be higher than Mary's.