Question

15. Which of the following functions of money would be violated if inflation were high? A) unit of account B) store of value C) certificate of gold D) medium of exchange 16. If nominal GDP is $400 billion and the money supply is $50 billion, the velocity of money A) 0.125. B) 8. C) 12. D) 20. 17) If the Central Bank raises an interest rate like the discount rate or the interbank rate, this will inflation and real GDP in the short run. A) reduce, increase B) increase, reduce C) increase; increase D) reduce; reduce 18) If the Central Bank increases reserve requirements from 10% to 12%, this will a. Increase the money supply and let banks loan out more money b. Decrease the money supply and let banks loan out more money c. Increase the money supply and cause banks to loan out less money d. Decrease the money supply and cause banks to loan out less money 19) Ramon has been unemployed for almost two years. He quit looking for work about a month ago He is categorized as A) a discouraged worker, but no longer considered unemployed. B) a discouraged worker and considered unemployed. C) no longer part of the adult working age population. D) employed.

Answer 1

(15) (B)

Higher inflation lowers purchasing power of money, and decreases real value of assets.

(16) (C)

M x V = P x Y = nominal GDP

V = (P x Y) / M = 600 billion / 50 = 12

(17) (D)

Increase in interest rate decreases investment, lowering aggregate demand. AD curve shifts left, decreasing price level and decreasing real GDP.

(18) (d)

Higher reserve ratio decreases money supply because banks have less excess reserve available for credit lending.

(19) (A)

Someone who was unemployed but stopped looking for job is a discouraged worker, and is out of labor force (so no longer unemployed).