Macroeconomics Chapter 13 hw

In the equation of exchange, if M = $1.5 trillion, V = 7, and P = 1.05, then: A. Q = $10 trillion B. Q = $10.5 trillion. C. nominal GDP is $10 trillion. D. real GDP is $10.5 trillion.

A. Q = $10 trillion

Quantitative easing refers to the process whereby the Federal Reserve: A. buys securities to stimulate the economy. B. raises interest rates to fight inflation. C. decreases the money supply to fight inflation. D. sells securities to stimulate the economy.

A. buys securities to stimulate the economy.

In the short run, changes in the money supply will NOT change output according to: A. classical economists B. classical economists and monetarists C. monetarists D. Keynesian monetary theory

A. classical economists

Generally, economists believe that monetary policy should focus on price stability in the _____ run and output or income in the _____ run. A. long; short B. short; short C. long; long D. short; long

A. long; short

When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that: A. the economy tends to move toward full employment in the long run. B. the economy tends to produce stable prices in the long run. C. the economy is stagnating at a low level of growth. D. shifting aggregate demand can change the level of employment in the long run.

A. the economy tends to move toward full employment in the long run.

Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is: A. 12. B. 1.33. C. 3. D. 2.

C. 3.

In a liquidity trap: A. monetary policy is somewhat effective in changing income and output in the short run. B. monetary policy is very effective in changing income and output. C. monetary policy is ineffective in changing income and output. D. fiscal policy is ineffective in changing income and output.

C. monetary policy is ineffective in changing income and output.

Tight monetary policy refers to the Federal Reserve: A. selling bonds to bring the economy to full employment. B. buying bonds to pull reserves from the banking system. C. raising interest rates, usually to fight inflation. D. increasing excess reserves to bring the economy to full employment.

C. raising interest rates, usually to fight inflation.

A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate demand curve _____. A. fall; rightward B. fall; leftward C. rise; leftward D. rise; rightward

D. rise; rightward