Choose the correct answer of the following 1. When the Fed adds more money to th

ID: 1211262 • Letter: C

Question

Choose the correct answer of the following

1. When the Fed adds more money to the economy, the Money Supply curve shifts to the ________, causing the equilibrium price level to ________.

a. Right, decrease

b. Left, decrease

c. Right, increase

d. Left, increase

2.According to the principle of monetary neutrality:

a. Real variables do not affect nominal variables.

b.Changes in the money supply do not affect real variables.

c. Nominal variables are not adjusted for inflation and real units are adjusted for inflation.

d. Nominal variables are expressed in monetary units and real variables are expressed in physical units.

3. Money Supply (M1) includes:

a. Demand deposits, traveler’s checks, money market mutual funds.

b. Currency, savings deposits, traveler’s checks.

c. Demand deposits, currency, traveler’s checks.

d. Savings deposits, traveler’s checks, and other checkable deposits.

4.The velocity of money is:

a. The rate at which money changes hands.

b. The speed at which the money multiplier works.

c. The speed at which prices rise in the economy.

d. The time it takes for checks to be cleared by the Fed.

5.If the Fed increased the supply of money, and velocity remains unchanged, according to the quantity equation:

a. P x Y must decrease.

b. Y must decrease.

c. Y must increase.

d. P x Y must increase.

(1) The correct answer is option (A).

(2) The correct answer is option (D).

(3) The correct answer is option (A).

(4) The correct answer is option (A).

(5) The correct answer is option (A).