Question : 12.2 Money, the Price Level, and Inflation 1) In the long-run, : 1238084

Economics

12.2 Money, the Price Level, and Inflation

1) In the long-run, money market equilibrium determines

A) the value of money.

B) the nominal interest rate

C) the real interest rate.

D) real GDP.

E) velocity.

2) The “value of money”

A) is the quantity of goods and services that a unit of money can buy.

B) is determined by Fed regulations.

C) increases during inflationary periods.

D) increases during economic expansions.

E) is directly related to the price level.

3) Which of the following applies to the “value of money”?

A) i and iii

B) i, ii and iii

C) iii only

D) ii and iii

E) i and ii

4) In the long run, what determines the value of money?

A) the government budget balance

B) international trade

C) money market equilibrium

D) equilibrium in the loanable funds market

E) real GDP

5) If the quantity of money supplied ________ the quantity demanded, in the long run the value of money ________.

A) exceeds; falls as people spend their surplus money

B) exceeds; rises as people buy bonds

C) is less than; falls as people spend their surplus money

D) is less than; does not change unless the Fed increases the money supply

E) equals; equals zero

6) The long-run money demand curve shows

A) that the value of money influences the quantity of money that households and firms plan to hold.

B) that the value of money is directly related to the quantity of money demanded.

C) the relationship between real GDP and money demand.

D) the relationship between potential GDP and money demand.

E) how the Fed determines the appropriate interest rate.

7) If the Fed increases the quantity of money, in the short run the ________ and in the long run the ________.

A) price level rises; the nominal interest rate falls

B) nominal interest rate falls; the price level falls

C) nominal interest rate rises; the price level falls

D) nominal interest rate falls; the price level rises

E) nominal interest rate rises; the price level rises

8) In the figure above, in the long run what happens if the Fed increases the quantity of money by 5 percent?

A) The value of money falls by 5 percent and there will be a movement down along the LRMD curve.

B) The real interest rate falls and the LRMD curve shifts rightward.

C) The nominal interest rate rises by 5 percent.

D) The price level rises by 5 percent and the LRMD shifts leftward.

E) The value of money rises by 5 percent.

9) In the figure above, what happens if the Fed increases the quantity of money by 8 percent?

A) The LRMD curve shifts rightward to restore equilibrium.

B) The value of money falls to 0.92 and there is a movement downward along the LRMD.

C) The price level falls to 1.08.

D) The interest rate rises to 1.08.

E) The value of money rises to 1.08.

10) In the long run, an increase in the quantity of money ________ the value of money and ________ the price level.

A) raises; raises

B) raises; does not change

C) lowers; lowers

D) lowers; does not change

E) lowers; raises

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July 1, 2023

61.When there is a shortage in a market, prices are likely to:

A. Fall because buyers do not wish to buy as much as sellers want to sell.

B. Rise because some buyers will offer to pay a higher price.

C. Fall because sellers are likely to reduce their production if prices rise.

D. Rise because the government will put a price ceiling in place.

62.If a market shortage exists:

A. The invisible hand will work to reduce the price.

B. The only solution is for the government to raise the price.

C. Producers will compete for customers by reducing prices.

D. Consumers will compete for the product by offering to pay more.

63.A market surplus occurs when:

A. People cannot buy the amount of goods and services that they are willing and able to buy.

B. The price is less than the equilibrium price.

C. The quantity supplied exceeds the quantity demanded at a given price.

D. There is a price ceiling.

64.When there is a surplus in a market, prices are likely to fall because:

A. Buyers do not wish to buy as much as sellers want to sell.

B. Some buyers will offer to pay a higher price, initiating a move up the supply curve.

C. Sellers are likely to increase their production.

D. Buyers will wait for the government to establish a price floor.

65.If a market surplus exists:

A. The only resolution is for the government to set the price.

B. Consumers will compete for the product buy offering to pay more.

C. Producers will compete for customers by reducing prices.

D. The equilibrium price is equal to the price ceiling.

66.If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:

A. To rise and quantity to fall.

B. And quantity both to rise.

C. To fall and quantity to rise.

D. And quantity both to fall.

67.If demand is constant, a leftward shift in the supply curve will result in:

A. A decrease in equilibrium quantity and a lower equilibrium price.

B. An increase in equilibrium quantity and a lower equilibrium price.

C. A decrease in equilibrium quantity and a higher equilibrium price.

D. An increase in equilibrium quantity and a higher equilibrium price.

68.The price of chocolate candy bars rises. This could be due to:

A. A decrease in the wage rate paid to workers in the candy bar factories.

B. A decrease in the cost of chocolate, which is used to produce candy bars.

C. A subsidy by the federal government for the producers of chocolate candy bars.

D. A decrease in the number of chocolate candy bar producers.

69.If demand is unchanged, a rightward shift in the supply curve for plasma TVs will cause:

A. A decrease in equilibrium quantity and a higher equilibrium price.

B. An increase in equilibrium quantity and a higher equilibrium price.

C. An increase in equilibrium quantity and a lower equilibrium price.

D. A decrease in equilibrium quantity and a lower equilibrium price.

70.Which of the following would cause a decrease in the price of automobiles?

A. A technological advance in automobile manufacturing.

B. An increase in the wages paid to automobile assembly line workers.

C. A decrease in the cost of gasoline.

D. An increase in the number of buyers.