An increase in the interest rates will
a. cause people to hold less money, which, in turn, means that the velocity of money increases.
b. cause people to hold less money, which, in turn, means that the velocity of money decreases.
c. cause people to hold more money, which, in turn, means that the velocity of money increases.
d. cause people to hold more money, which, in turn, means that the velocity of money decreases.
Question 2The labor force typically grows faster in developing countries than in industrial ones because mortality rates are higher in low-
income countries.
a. True
b. False
Indicate whether the statement is true or false
Question 3Calculate the elasticity of supply when an increase in demand causes the equilibrium price and quantity to change from 2.00 and 500 to 2.80 and 1,000, respectively.
Question 4An increase in M or an increase in V, other things equal, would definitely increase:
a. the price
level.
b. real GDP.
c. nominal GDP.
d. unemployment.
Question 5As all available statistics show us, because the average annual population growth is 1.4 percent higher in developing countries than in industrial nations, economic growth is lower in low-
income countries.
a. True
b. False
Indicate whether the statement is true or false
Question 6Calculate the
income elasticity of demand for DVDs, where a 10 percent increase in
income results in a 20 percent increase in the demand for DVDs. Decide from your answer, whether DVDs are normal or inferior goods.
Question 7Higher rates of anticipated inflation would tend to:
a. increase velocity and decrease nominal GDP.
b. increase velocity and increase nominal GDP.
c. decrease velocity and decrease nominal GDP.
d. decrease velocity and increase nominal GDP.
Question 8Other things equal, a country's long-run
aggregate supply will shift to the right when the productivity of labor rises.
a. True
b. False
Indicate whether the statement is true or false
Question 9Calculate the cross-price elasticity of demand between computers and printers, where a 10 percent decrease in the price of computers results in a 15 percent increase in the demand for printers.
Question 10If M increases, and V remains
constant:
a. P must rise.
b. Q must rise.
c. P and Q must each rise.
d. Any of the above may happen, but none of the above must happen.
Question 11The long-run growth of an economy depends on productive resources (land, labor, and capital) and on technological advances.
a. True
b. False
Indicate whether the statement is true or false
Question 12Calculate the elasticity of demand when an increase in supply causes the equilibrium price and quantity to change from 9 and 2,000 to 7 and 3,000, respectively.
Question 13Which of the following is true about the equation of exchange?
a. The equation of exchange can be presented as: M V = P Q.
b. Velocity represents the average number of times that a dollar is used in purchasing final goods or services in a one-year period.
c. If M increases, and V remains
constant, then P must rise and/or Q must rise.
d. All of the above are true about the equation of exchange.
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