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Exercise Topic 8

# Exercise Topic 8 - Topic 8 Money Growth and Inflation 1 The...

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Topic 8. Money Growth and Inflation 1. The price level that equates the quantity of money demanded with the quantity of money supplied is called the a. equilibrium price level. b. natural price level. c. relative price level. d. commodity price level. 2. Real economic variables measure a. value in the prices of some certain base year. b. value in the prices of the current year. c. nominal values adjusted for the current interest rate. d. nominal values adjusted for the current money supply. 3. According to the equation of exchange, money times velocity equals a. nominal GDP. b. real GDP. c. inflation-adjusted total output in the economy. d. the number of times each unit of money is spent on goods and services. 4. If real output in an economy is 1000 goods per year, the money supply is \$300, and each dollar is spent 3 times per year, then the average price of goods is a. \$0.90. b. \$1.11. Topic 8 - 1 -

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c. \$1.50. d. \$1.33. 5. Within the context of the equation of exchange, the higher the equilibrium price level is a. the higher is the nominal money supply. b. the lower is the nominal interest rate. c. the higher is real GDP. d. the lower is velocity. 6. If real GDP falls and the nominal interest rate rises, then the equilibrium price level a. must fall. b. must rise. c. will fall if the effect of the decline in real GDP dominates. d. will fall if the effect of the increase in the nominal interest rate dominates. 7. If the supply of money is greater than the amount of money people want to hold, then a. spending will increase and the price level will fall. b. spending will increase and the price level will rise.
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Exercise Topic 8 - Topic 8 Money Growth and Inflation 1 The...

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