Money & Banking 3

Front 1

The velocity of money is assumed to be constant in the Classical model because

Back 1

the payment habits of the community.

Front 2

In the Classical model, the aggregate supply curve determines the

Back 2

level of output.

Front 3

In the Classical model, what is certain to shift the aggregate demand curve?

Back 3

A rise in the money supply

Front 4

What economist in the early 20th century refined the use of the equation of exchange?

Back 4

Irving Fisher

Front 5

In the Classical model, aggregate demand determines the

Back 5

the price level.

Front 6

Modern monetarists view any increases or decreases in total output stemming from expansions or contractions in the money supply as

Back 6

temporary.

Front 7

In the view of the Classical economists, a decrease in aggregate demand leads to

Back 7

a higher price level.

Front 8

According to Say's law

Back 8

the economy will never suffer from unemployment or underconsumption.

Front 9

In the Classical system, the interest rate is determined by all of the following except

Back 9

the money supply.

Front 10

The Great Depression is thought to have been prolonged and made deeper by

Back 10

contraction of the money supply.

Front 11

Classical economists and modern monetarists agree that the best way to examine the economy is through the use of
Question 11 answers

Back 11

the quantity theory.

Front 12

Monetarists have maintained the Classical tradition by emphasizing the
Question 12 answers

Back 12

inherent stability of the economy.

Front 13

If the equation of exchange holds, and if the velocity of money and total output are fixed, then, if the money supply doubles,

Back 13

the price level will double.

Front 14

Money neutrality implies that changes in the money supply have an impact on

Back 14

the price level.

Front 15

In the Classical view, the money supply determines

Back 15

the price level.

Front 16

Which of the following is assumed constant in the short-run Classical model?

Back 16

Output

Front 17

In the Classical system, the total output of goods and services and total employment are determined by all of the following except

Back 17

the interest rate.

Front 18

Which of the following ensures full employment in the Classical model?

Back 18

Wage and price flexibility

Front 19

Monetarists view government intervention in the economy as

Back 19

unnecessary and potentially damaging.

Front 20

Monetarists differ from Classical economists in that they argue that

Back 20

velocity is not fixed but is predictable.

Front 21

In the Classical view, inflation is the result of

Back 21

excessive monetary growth.

Front 22

Modern Monetarists argue that the velocity of money is

Back 22

predictable.

Front 23

Question 23 text In the Classical model, a decrease in the money supply __________ the real GDP and __________ the price level.

Back 23

leaves unchanged; lowers

Front 24

According to Classical interest rate theory, which of the following will increase the equilibrium interest rate?

Back 24

A decrease in saving

Front 25

In the view of the Classical economists, rising aggregate demand leads to

Back 25

inflation.

Front 26

According to Classical interest rate theory, falling interest rates will

Back 26

decrease the saving rate.

Front 27

The two cornerstones of Classical economics are the Quantity Theory and

Back 27

Say's Law.

Front 28

The function of the interest rate in the Classical model was to keep the economy at full employment equilibrium by assuring that

Back 28

actual saving equaled actual investment.

Front 29

In the Classical model, the price level is determined by

Back 29

aggregate demand.

Front 30

What is Y - C equal to?

Back 30

S

Front 31

In an economy without government or a foreign sector the equilibrium level of output occurs when

Back 31

actual saving equals actual investment.

Front 32

In an economy without government or a foreign sector it is always true that

Back 32

actual saving equals actual investment.

Front 33

Which of the following is not a factor in the equation of exchange?

Back 33

Nominal income

Front 34

In the Classical interest theory, saving and investment determine

Back 34

interest rates.

Front 35

If the inflation rate is 5 percent and the real rate of interest is 3 percent, the nominal interest rate is

Back 35

8 percent.

Front 36

If C + I = Y and Y - C = S, then

Back 36

S = I.

Front 37

If velocity and output are fixed at 5 and 400, respectively, and the price level is 2, then the money supply is

Back 37

160.

Front 38

In an economy with no government or foreign sector, which of the following always holds true, ex-post?

Back 38

Saving equals investment.

Front 39

Question 39 text In the Classical model, an increase in aggregate demand leads to __________ real GDP and __________ price level.

Back 39

an unchanged; a rising

Front 40

According to Classical interest rate theory, rising interest rates will

Back 40

increase the saving rate.