If M stands for the money supply, V for the velocity of money, P for the average selling price, and Q for the output of goods and services, the equation of exchange is:
a. MP = VQ.
b. MV = PQ.
c. MQ = VP.
d. MP = PQ.
QUESTION 2If the marginal propensity to consume (MPC) is 0.96, the value of the spending multiplier is:
a. 25.
b. 40.
c. 96.
d. 100.
QUESTION 3Sharon was being treated unfairly by her boss, so she stormed off the job and two days later found another position. For two days, Sharon experienced:
a. cyclical unemployment.
b. structural unemployment.
c. seasonal unemployment.
d. frictional unemployment.
e. being out of the labor force.
QUESTION 4The equation of exchange states that:
a. money supply multiplied by real output equals velocity.
b. velocity multiplied by money supply equals the selling price times the quantity of actual output.
c. money supply divided by velocity equals nominal GDP.
d. money supply divided by velocity equals real GDP.
QUESTION 5As the marginal propensity to consume (MPC) increases, the spending multiplier:
a. increases.
b. decreases.
c. remains constant.
d. becomes undefinable.
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