Question 1 of 50 1 0 1 0 Points The equation of exchange always holds because A the quantity of money is determined by the amount of spending on goods and services B the quantity of money dictates the size of nominal GDP since money is a social usage C the number of times money is spent to obtain goods and services measures total spending on GDP D MV measures total spending on GDP and PY also measures of total spending on GDP Answer Key D Question 2 of 50 1 0 1 0 Points In the equation of exchange if velocity is stable in the long run A V 0 B V 1 C V is a positive constant value 0 D V infinity Answer Key A Question 3 of 50 0 0 1 0 Points In the long run unemployment will be at the natural rate This implies that A there is a one to one relationship between unemployment and inflation and consequently the Phillips curve is vertical B there is no relationship between unemployment and inflation and consequently the Phillips curve is vertical C there is a positive relationship between unemployment and inflation and consequently the Phillips curve is upward sloping D there is a negative relationship between unemployment and inflation and consequently the Phillips curve is downward sloping Answer Key B Question 4 of 50 1 0 1 0 Points In the short run and in the long run there is a tradeoff between inflation and unemployment A True B False Answer Key False Question 5 of 50 1 0 1 0 Points SEE ATTACHED FIGURE 1 Suppose the economy is initially at K Which of the following statements best explains how the economy responds to restore long run macroeconomic equilibrium rhw9ex1 pdf 51 KB A Over time the aggregate demand curve will shift to the right until long run equilibrium is restored at J and the gap is closed B Rising unemployment puts pressure on nominal wages to fall The SRAS curve shifts right to SRAS1 closing the gap at H C In response to rising prices firms will increase production moving along SRAS2 until long run equilibrium is restored at J and the gap is closed D Rising unemployment puts pressure on nominal wages to fall Firms employ more workers moving along SRAS2 until long run equilibrium is restored at J and the gap is closed Answer Key B Question 6 of 50 1 0 1 0 Points What do economists mean by the term sticky wage A It refers to the reluctance by employers to increase nominal wages during an inflationary period B It refers to a wage that is slow to adjust to its equilibrium level creating sustained periods of shortage or surplus in the labor market C It refers to a breakdown in wage negotiations between employers and employee unions D It refers to a union negotiated wage Answer Key B Question 7 of 50 1 0 1 0 Points The long run aggregate supply curve is vertical at the level of real output that corresponds to the natural rate of employment A True B False A True B False A True B False Answer Key True Question 8 of 50 1 0 1 0 Points The potential level of real GDP is the level of output a society can achieve when labor is employed at its natural level Answer Key True Question 9 of 50 1 0 1 0 Points Sustained inflation over many years is most likely due to increases in the money supply in excess of increases in potential output Answer Key True Question 10 of 50 1 0 1 0 Points Assume that velocity is constant in the long run Which of the following equations correctly describes the quantity equation in terms of percentage rate of change A chM chP chY B chM chP chY C chM chY chP D chM x chY chP Answer Key C Question 11 of 50 1 0 1 0 Points SEE ATTACHED FIGURE 2 Suppose that the economy is in long run equilibrium at point A Now suppose government purchases of goods and services increases What happens in the SR LR rhw9ex2 pdf 50 KB A SR output Yb price Pb LR output Yp price Pa B SR output Yb price Pb LR output Yp price Pd C SR output Yp price Pa LR output Yp price Pb D SR output Yb price Pb LR output Yp price Pb Answer Key A Question 12 of 50 1 0 1 0 Points If the velocity of money is constant then a 2 increase in the money supply A must be the result of a 2 increase in the price level B would change nominal GDP by a smaller percentage C would change nominal GDP by an equal percentage D would change nominal GDP by a larger percentage Answer Key C Question 13 of 50 1 0 1 0 Points A decrease in aggregate demand all other things unchanged will generate in potential output and in the price level A an increase no change B a decrease no change C no change an increase D no change a decrease Answer Key D Question 14 of 50 1 0 1 0 Points The sticky price explanation of the short run aggregate supply curve says that when the average price level rises A some firms will immediately pass the higher prices to consumers B because of adjustment costs associated with changing prices some firms will not raise their prices immediately which may temporarily boost their sales C firms will raise their output prices by more than the increase in the average price level to make up for the shortfall in sales D consumers are unwilling to pay higher prices resulting in a decrease in aggregate demand Answer Key B Question 15 of 50 1 0 1 0 Points If GDP is 5 000 billion and the velocity of the M2 money supply is 5 what is the amount of the public s holding in the form of M2 A 500 B 1 000 C 1 500 D 2 000 Answer Key B Question 16 of 50 1 0 1 0 Points In the long run the output level is determined by A aggregate demand B aggregate supply C the government D household income Answer Key B Question 17 of 50 1 0 1 0 Points Which of the following statements is true of the economy in the long run In the long run real GDP eventually moves to potential because all wages and prices are assumed to be flexible the economy can achieve its natural level of employment and potential output at any price level there is no cyclical unemployment A I only B I and II only C I and III only D I II and III Answer Key D Question 18 of 50 1 0 1 0 Points If you earn and spend 2 000 per month and maintain an average cash balance of 500 per month your velocity of money is A 1 250 B 2 C 4 D 1 500 Answer Key C Question 19 of 50 1 0 1 0 …