Quiz 3

If the real interest rate is 6% and the price level is falling at a rate of 2%, what is the nominal interest rate?

4%

Which of the following best illustrates the medium of exchange function of money? a) You keep some money hidden in your shoe. b) You keep track of the value of your assets in terms of currency. c) You pay for your oil change using currency. d) None of the above is correct.

c) You pay for your oil change using currency.

According to classical dichotomy, when the money supply doubles, which of the following also doubles? a) the price level b) nominal wages c) nominal GDP d) all of the above

d) all of the above

When the price level falls, the number of dollars needed to buy a representative basket of goods:

decreases, so the value of money rises

On a bank's T-account, which are part of the banks liabilities?

deposits made by its customers but not reserves