MULTIPLE CHOICE
1.
Critics of macroeconomic stabilization policies argue that
a.
economists are unable to influence policy.
b.
stabilization policies often do more harm than good.
c.
stabilization theory has no practical effect.
d.
policy makers need practical advice, not theory.
ANS: B
DIF:
Moderate
TOP:
Introduction
2.
After the attacks of September 11, 2001, the proper policy response was
a.
contractionary monetary and fiscal policy.
b.
contractionary monetary and expansionary fiscal policy.
c.
expansionary monetary and fiscal policy.
d.
expansionary monetary and contractionary fiscal policy.
ANS: C
DIF:
Moderate
TOP:
Introduction
3.
Which of the following is the formula for velocity?
a.
Velocity = nominal GDP/real GDP
b.
Velocity = real GDP/M
c.
Velocity = (P x Y)/(M x V)
d.
Velocity = nominal GDP/M
ANS: D
DIF:
Easy
TOP:
Velocity and the Quantity Theory of Money
4.
The equation of exchange is written as
a.
M x V = P x Y.
b.
M x P = V x Y.
c.
M x Y = P x V.
d.
M x Y = Y x P.
ANS: A
DIF:
Moderate
TOP:
Velocity and the Quantity Theory of Money
5.
The velocity of circulation is the
a.
speed at which the multiplier takes effect.
b.
speed at which money circulates.
c.
speed at which tax cuts get spent.
d.
rate at which money creation takes place.
ANS: B
DIF:
Easy
TOP:
Velocity and the Quantity Theory of Money
6.
Velocity can be calculated as the ratio of the value of transactions to
a.
the price level.
b.
level of real GDP.
c.
the money stock.
d.
the inflation rate.
ANS: C
DIF:
Easy
TOP:
Velocity and the Quantity Theory of Money
7.
If you divide the amount of nominal GDP by the stock of money, you have computed the
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multiplier.
b.
price level.
c.
velocity of circulation.
d.
inflation rate.
ANS: C
DIF:
Easy
TOP:
Velocity and the Quantity Theory of Money
8.
Which is likely to be larger, the velocity of M1 or M2?
a.
M1, because M2 is a larger number.
b.
M2, because M1 is a larger number.
c.
The velocities of both are approximately equal.
d.
The numbers of velocity switch in relative size.
ANS: A
DIF:
Moderate
TOP:
Velocity and the Quantity Theory of Money
9.
The equation M x V = P x Y is called the
a.
multiplier formula.
b.
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 Spring '08
 IFORGET
 Inflation, Monetary Policy, Quantity Theory of Money, Quantity Theory

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