If the money supply is $20,000, velocity is 3, and Real GDP is 5,000 units of output, then the price level is _____________. If the money supply doubled over a short time period to $40,000, the simple quantity theory of money would predict that _____________________.
A. $12; the price level would double
B. $6; Real GDP would double
C. $12; the price level would be cut in half
D. $6; the price level would double
Ans: A. $12; the price level would double
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According to Thomas Sargent and other new classical economists,
a. a credible policy to provide low stable money growth can exist with a fiscal policy that generates large deficits. b. a credible policy to provide low stable money growth cannot coexist with a fiscal policy that generates large deficits. c. there is no need for a credible, noninflationary monetary policy to control the government budgetary deficit. d. None of the above
Discuss the three fundamental economic questions that all nations must address
Which of the following is true? a. The Rule of 70 says that the number of years necessary for a nation to double its output is approximately equal to the nation's growth rate divided by 70. b. Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita. c. An increase in labor input necessarily increases output per capita
d. Neither the initial development process nor the sustained growth of an economy is dependent on a large natural resource base.
The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption and more saving is known as the
a. real wealth effect b. interest rate effect c. foreign purchases effect d. income effect e. aggregate demand effect