homework 2 - Econ 716-21 Macroeconomics for Finance Lau...

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1 Econ 716-21 Macroeconomics for Finance Lau Problem Set II Fall 2010 Instructions: 1. Answer all questions. 2. Please form study group of up to 3 persons and work on the problem set. 3. Show your formulas and steps clearly. 4. Due date: 11/1/2010 (M) @8am Part I Multiple Choice: (36 points; 3 points each) 1. People use money as a store of value when they A. hold money to transfer purchasing power into the future. B. use money as a measure of economics transactions. C. use money to goods and services. D. hold money to gain power and esteem. 2. In a country on a gold standard, the quantity of money is determined by the A. government B. central bank C. amount of gold D. buying and selling of government securities. 3. Credit cards A. are part of the M1 money supply. B. are part of the M2 money supply. C. are part of the M1 and M2 money supply. D. may affect the demand for money. 4. If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be: A. 3 percent. B. 4 percent. C. 9 percent. D. 11 percent. 5. If the Fed announces that it will decrease the money supply in the future but does not change the money supply today: A. both the nominal interest rate and the current price level will decrease.
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homework 2 - Econ 716-21 Macroeconomics for Finance Lau...

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