Economics chapter 11, 13, 15

If the money supply is $1,000, the price level is 3, and real income (or output) is $5,000, then the velocity of money is

15

Expansionary and contractionary gaps are automatically eliminated by shifts in aggregate demand.

False

In the quantity theory of money, it is assumed that M and P are the only elements in the equation that are free to fluctuate.

False

Reducing net taxes and reducing government purchases are both effective ways of eliminating an expansionary gap.

False

The Federal Reserve Bank from Dallas deals with the public (households) directly.

False

The chairman of the Fed must resign when a new president is elected.

False

The higher the interest rate, the more of their wealth people will hold as money.

False

The money demand curve shifts to the right whenever there is a decrease in the interest rate.

False

The only way in which government can affect aggregate demand is through changes in its own purchases.

False

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

False

Which of the following best describes the concept of laissez-faire?

Government should not intervene in the economy.

The Federal Reserve banks do all of the following, except:

Mint coins

Under the Federal Reserve System,

there are 12 Federal Reserve banks

Each member of the Board of Governors serves

a fourteen-year term

The opposite of a laissez-faire economic policy is

active government intervention

Deregulation of banks and other depository institutions did all of the following except

allow the FDIC to open branch banks of its own

To close an expansionary gap using fiscal policy, the government can

decrease government spending or increase taxes

If the money supply equals $1,000 and nominal GDP equals $3,000, then V

equals 3

Which of the following are used in fiscal policy?

government purchases, transfer payments, and taxes

As the number of goods and services increases, barter becomes

harder because the chance of there being a double coincidence of wants decreases

The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by

lending money to the commercial banks

Which of the following is not a function of the Federal Reserve System?

making loans to the public

If the money supply increases when there is much idle capacity in the economy,

most of the resulting rise in nominal GDP will be a result of increases in real output

The money demand curve will shift when there is a change in

nominal GDP

If government purchases increase and net taxes decrease,

output and employment will increase

In an economy in which velocity is constant and the same level of real output is produced year after year, a slow increase in the money supply would result in a

slowly increasing price level

Which of the following is not true about classical economists?

They believed prices and wages react slowly to market changes.

Barter is the exchange of goods and services without the use of money.

True

One disadvantage of discretionary fiscal policy is that it can return the economy to its potential level of output but at the cost of increasing the price level.

True

The demand for money is depicted by a curve downward sloping curve because if the interest rate falls, the opportunity cost of holding assets in the form of money decreases.

True