1) From the equation of exchange, if both nominal income and the quantity of money (m) have tripled, while the price level(P) has increased by 5o percent and velocity (V) a) Also triples b) Doubles c) Decreased by 50 percent d) Increased by 50 percent e) None of the above 2) The main reason that hyperinflation renders a currency worthless is that _ a) Laws against raising prices are easily evaded b) As soon as inflation seems out of control, everyone knows that the currency will soon lose whatever value it has today

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1) From the equation of exchange, if both nominal income and the quantity of money (m) have tripled, while the price level(P) has increased by 5o percent and velocity (V)

a) Also triples

b) Doubles

c) Decreased by 50 percent

d) Increased by 50 percent

e) None of the above

2) The main reason that hyperinflation renders a currency worthless is that _

a) Laws against raising prices are easily evaded

b) As soon as inflation seems out of control, everyone knows that the currency will soon lose whatever value it has today.

c) The government cannot print money fast enough to keep up with rising prices.

d) The goverments' official inflation rate is always a gross understatement

e) Reducing government expenditures is politically unpopular

3) Rational inattention refers to

a) The cost to the firm losing sales from alienating customers

b) Firms making infrequent price decisions because of the time limit and effort those decision require

c) The risk a firm when they do not pay attention to their customers

d) All of the above

e) None of the above

4) Economist use the term 'potential output' to refer to _

a) The maximum level of output of which an economy is capable

b) A level of output that has not yet been achieved.

c) The sum of finished goods plus in production that will be finished within the year

d) The level of output that occurs when all prices are fully adjusted

e) None of the above

5) Open Market operations alter the money supply by_

a) Adding currency to or withdrawing currency from banks vaults.

b) Influencing banks ability to make loans to individuals and corporations

c) Influencing banks ability to make loans to the government

d) Adding currency to or withdrawing currency from the checking accounts of individuals and corporations

e) None of the above

6) The quantity theory of money_

a) Gives mathematical grounding for the view that a country's central bank determines the general price level through control of the money supply.

b) Implies that changes in the money supply never have an impact on real variables

c) Is used by classical economist to explain how frequent changes in velocity lead to infrequent changes in the price level

d) All of the above

e) None of the above

7) The IS curve_

a) shows how changes in interest rates affect equilibrium output.

b) Explains short run fluctuations in output and inflation

c) Demonstrates how central banks respond to changes in inflation with changes in the interest rate.

d) All of the above

e) None of the above

8) The MP curve indicates the relationship between _ and the _

a) Taxes;price level

b) Monetary policy; is curve

c) The real interest rate; inflation rate

d) All of the above

e) None of the above

9) When the US real interest rate rises_

a) Makes US exports more expensive in foreign currencies

b) US dollar assets earn a lower return relative to foreign assets

c) Imports will decrease

d) All of the above

e) None of the above