econ ch 12

during an economic expansion when real GDP increases, the a) demand for money decreases b) real interest rate is constant c) supply for money decreases d) demand for money increases e) nominal interest rate is constant

d) demand for money increases

if real GDP is $200 the price level is 2.5, and velocity is 5, then the quantity of money is a) 100 b) 750 c) 200 d) 1000 e) 500

a) 100

in the long run an increase in the quantity of money ________ the value of money and _______ the price level. a) lowers, raises b) raises, raises c) lowers, lowers d) does not change, raises e) raises, lowers

a) lowers, raises

in the money market, if the nominal interest rate is below the equilibrium level a) the quantity of money demanded exceeds the quantity of money supplied b) the supply of the money curve will shift leftward c) the quantity of money supplied exceeds the quantity of money demanded d) asset prices will rise e) the demand for money curve will shift leftward

a) the quantity of money demanded exceeds the quantity of money supplied

in the long run, money market equilibrium determines a) the value of money b) the real interest rate c) the nominal interest rate d) velocity e) real GDP

a) the value of money

if inflation is making it difficult for people to estimate the true marginal benefits and true marginal costs of activities, inflation is leading to a) shoe-leather cost b) confusion cost c) increased economic growth d) tax costs e) uncertainty costs

b) confusion cost

if the inflation rate is zero, the nominal interest rate is a) greater than the real interest rate b) equal to the real interest rate c) equal to the inflation rate d) less than the real interest rate e) positive and the real interest rate is negative

b) equal to the real interest rate

the opportunity cost of holding money is that you a) pay a higher tax rate b) forego interest on an alternative asset c) have trouble balancing your check book d) must make more trips to the bank to manage the money e) run a greater risk of being robbed

b) forego interest on an alternative asset

the quantity of money demanded will decrease if the a) nominal interest rate decreases b) nominal interest rate increases c) inflation rate decreases d) price level rises e) real interest rate decreases

b) nominal interest rate increases

When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage a) decrease in velocity b) increases in real GDP c) decrease in real GDP d) decrease in the price level e) increases in the price level

e) increases in the price level