Question

Question 43 5 pts

If the Money Supply (M) is $10 billion, real GDP (Q) is $20 billion, and the Price Level (P) is 2.0, then the velocity of money (V) is:

2.

40.

20.

4.

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Question 44 5 pts

Which of the following does NOT explain the downward slope of the aggregate demand curve?

The real balance (wealth) effect

The multiplier effect

The international trade effect

The interest rate effect

Question 45 5 pts

An increase in household wealth when the SRAS curve is upward sloping:

leads to an increase in both the price level and real GDP.

has no impact on the price level but leads to an increase in real GDP.

leads to an increase in the price level but has no impact on real GDP.

has no impact on the price level or real GDP.

Question 46 5 pts

If the price of a major input, such as oil, increases:

the SRAS curve shifts to the right.

input prices are likely to fall.

the SRAS curve shifts to the left.

output prices are likely to fall.

Answer 1

43.

Velocity of money (V)= Nominal GDP/Money supply (M)

M= $10 billion

Real GDP= $20 billion

Price level=2.0

Nominal GDP= Real GDP x Price level

Nominal GDP= $20 billion x 2.0=$40 billion

V= $40 billion/$10 billion=4.

44.

The multiplier effect. The multiplier effect states the change in final income due to an injection of spending. The formula for multiplier effect= 1/1-MPC.

AD is downward sloping because of the real balance effect where wealth of the population changes due to changes in price level. The international effect states that when price level in the home country increases, exports fall and imports rise.

The interest rate effect states that when interest rates rise, investment falls. Investment is a component of AD.

45.

Leads to an increase in both the price level and real GDP.

46.

The SRAS curve shifts to the left.