the value of transactions , economics homework help

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1. The equation of exchange is written as a. M  V = P  Y. b. M  P = V  Y. c. M  Y = P  V. d. M  Y = Y  P. 2. 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. 3. In 2009, nominal GDP was $14,050 billion and M1 was $1,587 billion. Velocity was a. 0.11. b. 8.85. c. 11.30. d. 14.25. 4. The speed with which money circulates through the economy is called the a. oversimplified multiplier. b. velocity of circulation. c. exchange rate. d. money multiplier. 5. If nominal GDP is 8,100 billion florins and the money supply is 900 billion florins, the velocity of circulation is a. 900.0. b. 90.0. c. 81.0. d. 9.0. e. 8.1. 6. Nominal GDP is proportional to money stock when a. velocity of money is volatile. b. velocity of money is constant. c. there are major changes in the value of velocity of money. d. velocity of money is zero. 7. Velocity can be computed with the formula a. (Annual spending)/(Money supply). b. (Annual income)/(Annual spending). c. (Average income)/(Average spending). d. (Money supply)/(Average income). 8. Following an anticapitalist coup, Freedonia forces all citizens to turn in and stop using all credit cards. What is the most likely effect of this on velocity? a. It will decrease. b. It will increase. c. It will remain constant. d. Velocity is unrelated to credit cards. 9. In 2005-2006, the Fed increased interest rates in an attempt to halt inflation. What was the most likely effect of raising interest rates on velocity? a. It will decrease. b. It will increase. c. It will remain constant. d. Velocity is unrelated to saving accounts. 10. According to the simple quantity theory of money, a change in the money supply of 9.6 percent would lead to a a. 9.6 percent change in velocity. b. 9.6 percent change in real GDP. c. 9.6 percent change in nominal GDP. d. 9.6 percent change in aggregate supply. 11. If the aggregate supply curve is steep, a. increased aggregate demand will not lead to higher prices. b. greater demand for labor will not cause significant wage increases. c. business firms are probably producing near capacity. d. All of the above are correct. 12. When will stabilization policy be most effective in combating recessions? a. when AS is flat b. when AS is very steep c. when AS has a moderately upward slope d. when AS has a moderately downward slope. 13. Most economists agree that the focus of fiscal policy is to a. plan the economy. b. balance aggregate demand and aggregate supply. c. balance the federal budget. d. balance environmental needs and resources. 14. Which of the following is expected to increase aggregate demand in the short run? a. Deficit budget b. Surplus budget c. Zero based budget d. Balanced budget 15. If the economy is in a recessionary gap, and the government attempts to balance the budget, the effect will be to a. counteract the recession. b. worsen and prolong the recession. c. end the recession sooner. d. increase the level of real GDP. 16. If the economy is in an inflationary gap, and the government attempts to balance the budget, the effect will be to a. counteract inflation. b. reduce the trade deficit. c. continue inflationary pressures. d. increase unemployment. 17. The deficit can be defined in simple terms as a. Tax receipts  government expenditures + transfers. b. Tax receipts + government expenditures + transfers. c. Government expenditures + transfers  tax receipts. d. Government expenditures  transfers  tax receipts. 18. A budget surplus exists when a. Tax receipts < government expenditures + transfers. b. Tax receipts > government expenditures + transfers. c. Government expenditures  transfers > tax receipts. d. Government expenditures > transfers + tax receipts. 19. With no change in fiscal policy, the budget a. will run a surplus during a recession and a deficit during a boom. b. deficit will rise during a recession and fall during a boom. c. deficit will fall during a recession and rise during a boom. d. will remain unchanged by adverse economic conditions. 20. In Figure 16-1, there are four levels of income. G is government expenditures and TT is taxes less transfers. At which level of income is the actual deficit the greatest? a. Y4 b. Y3 c. Y2 d. Y1 21. In Figure 16-1, there are four levels of income. G is government expenditures and TT is taxes less transfers. At which level of income does the official budget produce a surplus? a. Y4 b. Y3 c. Y2 d. Y1 22. If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy, we know that a. incomes will fall. b. the interest rate will rise. c. incomes will rise. d. the interest rate will fall. 23. If the government ran a major deficit, and there was no noticeable effect on the level of GDP, this could be taken as evidence of a. crowding-in. b. structural deficit. c. crowding-out. d. monetary policy ineffectiveness. 24. The above figure shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money. If the Federal Reserve does not want interest rates to rise, it will a. shift the money supply curve to the right by monetizing the deficit. b. shift the money supply curve to the left by open market sales of government securities. c. maintain the current targets for both M1 and M2 money stocks. d. engage in contractionary monetary policy, such as increases in the discount rate. 25. If budget deficits shift the money demand curve as is illustrated in the above figure, which component of total expenditures will be affected the most? a. consumption spending b. government spending c. private investment spending d. net exports 26. Both approaches-Keynesian and monetarist-are ways of analyzing a. aggregate supply. b. aggregate demand. c. the average price level. d. government spending and expenditures. 27. If the U.S. government decided to pay off the national debt by creating money, what would be the most likely effect? a. a substantial reduction in real GDP b. a deflationary collapse c. rapid inflation d. an increase in the trade surplus 28. If investment spending is relatively insensitive to changes in the interest rate, then the most effective expansionary policy would be a. a reduction in required reserves. b. Fed purchases of government securities. c. a personal income tax increase. d. a personal income tax cut. 29. Which of the following is the formula for velocity? a. Velocity = nominal GDP/real GDP b. Velocity = real GDP/M c. Velocity = (P  Y)/(M  V) d. Velocity = nominal GDP/M
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Explanation & Answer

Attached.

Student’s Name
Lecture’s Name
Course Name
Date
1. 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. M x V = P x Y.

2. 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

3. In 2009, nominal GDP was $14,050 billion and M1 was $1,587 billion. Velocity was

a. 0.11.
b. 8.85.
c. 11.30.
d. 14.25.
Ans; B

4. The speed with which money circulates through the economy is called the

a. oversimplified multiplier.
b. velocity of circulation.
c. exchange rate.
d. money multiplier.
Ans; B

5. If nominal GDP is 8,100 billion florins and the money supply is 900 billion florins,
the velocity of circulation is
a. 900.0.
b. 90.0.
c. 81.0.
d. 9.0.
Ans; D

6. Nominal GDP is proportional to money stock when
a. velocity of money is volatile.
b. velocity of money is constant.
c. there are major changes in the value of velocity of money.
d. velocity of money is zero.
Ans: B

7. Velocity can be computed with the formula
a. (Annual spending)/(Money supply).
b. (Annual income)/(Annual spending).
c. (Average income)/(Average spending).
d. (Money supply)/(Average income).

Ans; A

8. Following an anticapitalist coup, Freedonia forces all citizens to turn in and stop using
all credit cards. What is the most likely effec...


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