Question : 111) Which of the following best represents the view of : 1384463

111) Which of the following best represents the view of the Classical economists regarding money?

A) Relative prices are determined by the money supply.

B) The monetary sector influences consumers’ preferences and relative prices.

C) The economy is composed of the real sector and the monetary sector, and the latter does not affect the former.

D) The distribution of income is affected by the money supply.

E) The allocation of resources is affected by the money supply.

112) According to the views of the Classical economists, if the money supply doubles,

A) money prices will double.

B) money prices will be halved.

C) relative prices will double.

D) real income will double.

E) there will be no effect on money prices.

113) Classical economists’ belief in the “neutrality of money” led them to argue that

A) absolute prices were determined in the real part of the economy.

B) the allocation of resources was determined by the quantity of money and not by the forces of supply and demand.

C) relative prices have no role in the real allocation of resources.

D) a change in the quantity of money would not affect money prices or relative prices.

E) a change in the quantity of money would change the price level but would not change relative prices.

114) Which of the following statements best describes the difference between the Classical and modern views regarding the role of money in the economy?

A) Both schools of thought accept the neutrality of money within the economy.

B) Unlike modern economists, Classical economists believed that the neutrality of money existed only in the long run.

C) Classical economists argued that relative prices are determined by the supply of money, while modern economists believe that the money supply will never affect relative prices.

D) Both Classical and modern economists accept the neutrality of money in the long run, but modern economists question neutrality in the short run.

E) Both Classical and modern economists accept the neutrality of money in the short run, but modern economists question neutrality in the long run.

115) The long-run neutrality of money implies that

A) changes to the money supply have no effect on either the price level or real GDP.

B) changes to the money supply never have any effect on real GDP.

C) in response to any change in the money supply, the economy’s adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply.

D) the economy’s level of potential output will adjust to accommodate any change in the money supply.

E) in response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables.

116) The hypothesis in economics known as hysteresis is that

A) the economy’s adjustment process operates in response to an expansion of the money supply, but not a contraction.

B) changes in the money supply have a stronger influence on investment demand than do changes in fiscal policy.

C) the monetary transmission mechanism does not apply in an open-economy setting.

D) the role of money in the long run is neutral.

E) the path of real GDP in an economy can influence that economy’s level of potential output.

117) Suppose changes in the money supply only affected the price level and never affected real GDP. If this were the case, it could be viewed as evidence

A) that the modern view of the neutrality of money is correct.

B) supporting both the Classical and modern views of the neutrality of money.

C) that both the Classical and modern views of the neutrality of money are incorrect.

D) that the Classical view of the neutrality of money is correct.

E) that has no bearing on the theories of either Classical or modern economists.

A) $500 billion; 2%; 100; $800 billion

B) $540 billion; 2%; 102; $805 billion

C) $500 billion; 4%; 104; $800 billion

D) $540 billion; 4%; 102; $795 billion

E) $540 billion; 4%; 104; $800 billion

119) Refer to Figure 28-5. This economy begins in equilibrium with , and real GDP equal to potential GDP (with and ). Now suppose there is an increase in the money supply to $540 billion. In the long run, after all adjustments have taken place, what is the effect of the increase in the money supply?

A) an increase in the price level to 102, and no change to any real economic variables

B) an increase in the price level to 104, and no change to any real economic variables

C) a decrease in the interest rate to 2% and an increase in the price level to 104

D) a decrease in the interest rate to 2%, an increase in potential GDP to $805 billion, and an increase in the price level to 102

E) a decrease in the interest rate to 2%, an increase in real GDP to $805 billion and an increase in the price level to 102

120) Refer to Figure 28-5. This economy begins in equilibrium with , and real GDP equal to potential GDP (with and ). Now suppose there is an increase in the money supply to $540 billion. According to the Classical economists of the eighteenth and nineteenth centuries,

A) the neutrality of money holds in the long run, but in the short run changes in the money supply cause significant fluctuations of real GDP.

B) the neutrality of money holds in the long run, but in the short run changes in the money supply cause significant fluctuations in employment but not real GDP.

C) there is no connection between the “money” and “real” sides of the economy, and the only effect is a decrease in the interest rate.

D) there is no connection between the “money” and “real” sides of the economy, and the only effect is a rise in the price level.

E) such increases in the money supply cause long-run disequilibriums in the economy.