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1.The number of times one unit of money (currency) completes the circular flow in a given time period is called____________
a. Velocity of consumption and saving
b. Velocity of goods
c. Velocity of money
d. Velocity of money supplied by the Federal Reserve
this is called : d. Velocity of money
2.During an economic crisis as the one we are experiencing today; the velocity of money is expected to be__________________, this is because during a crisis, when prices decline, _________
a. Unchanged, economic conditions do not affect the velocity of money
b. Lower, individuals spend less
c. Higher, individuals sell their assets faster to get hard currency
d. Higher, the government prints less money
When prices fall the individuals spend less: b. Lower, individuals spend less
3.According to the quantity theory of money, an excessive increase in the money supply will result in_______________, and more specifically, a 10% increase in money supply would lead to______percent increase in it.
a. Higher price level, more than 10%
b. Higher interest rate, 12%
c. Lower economic growth, less than 10%
d. Higher price level, 10%
Price increase is more than increase in money supply. a. Higher price level, more than 10%
4.According to Irving Fisher, in order to derive the quantity theory conclusion, which ones of the following are assumed to be constant? Your answer is------
a. P and Y
b. Y and M
c. V and P
d. V and Y
actually it is V and Q, d. V and Y
5.John Maynard Keynes highlighted a shortcoming of the Fisherian quantity theory equation. He claimed that real output (Y) could not stay constant when the money supply is increased because of which characteristic of a capitalistic economy?
a. Persistent Involuntary unemployment if government does not act
b. Adjustable interest rates if Federal Reserve does not act
c. Frictional unemployment if government does not act
d. Structural unemployment if government does not act
This means there is no intervention b.Adjustable interest rates if Federal Reserve does not act
6.With interest rates in the U.S. economy at record lows, the liquidity trap argument as presented by Keynes suggests that an increase in the money supply will have what effect on the economy?
a. It will have a positive effect on real investment rate and real income
b. It will have no impact on aggregate demand or GDP
c. It will have a negative effect on aggregate demand and GDP
d. Cannot be predicted without more information
There will be no impact on the interest rates and so b. It will have no impact on aggregate demand or GDP.
7.Which of the following is true? According to Keynes, effectiveness of monetary policy must be examined in terms of its effect on I. Real consumption II. Real investment III.Aggregate demand IV.Real GDP
a.I, II, III
b. II, III and IV
c. IV only
d.I and IV only
e. I, II, IV
There is no mention of real consumption. b. II, III and IV
8.The money market is said to be at equilibrium when__________________
a. The actual interest rate equals the normal interest rate
b. The upward sloping money supply curve intersects the downward sloping money demand curve
c. The vertical money supply curve intersects the ...
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