Question

This is in multiple choice format.

1. Assume an economy has wages of $50 and a price level of 5. What is the real wages in this economy?

   		$25
   		$500
   		$55
   		$10

QUESTION 29

1. According to money neutrality which of the following would change if there was a change in money supply?

   		nominal interest rates
   		real wages
   		real GDP
   		real interest rates

QUESTION 30

1. A banking system in which banks hold only a fraction of deposits as reserves is known as

   		divisional reserve banking
   		central reserve banking
   		fractional reserve banking
   		monetary reserve banking

QUESTION 31

1. The ease with which an asset can be converted into the economy’s medium of exchange is known as

   		fiat money
   		liquidity
   		commodity money
   		currency

QUESTION 32

1. A large and sudden reduction in the demand for assets located in the country is known as

   		capital overflow
   		capital inflow
   		capital underflow
   		capital flight

Answer 1

Answer-28 Assume an economy has wages of $50 and a price level of 5. What is the real wages in this economy?

$10

Real wages= Wages/Price level

                   =50/5

                   =$10.

Answer- 29 According to money neutrality which of the following would change if there was a change in money supply.

nominal interest rates.

According to the principle of money neutrality changes in the money supply changes nominal variables not the real variables.

Answer-30 A banking system in which banks hold only a fraction of deposits as reserves is known as

fractional reserve banking is a banking system in which banks hold only a fraction of deposits as reserves

Answer -31 The ease with which an asset can be converted into the economy’s medium of exchange is known as

liquidity is the ease with which an asset can be converted into the economy’s medium of exchange

Answer-32 A large and sudden reduction in the demand for assets located in the country is known as

capital flight is the large and sudden reduction in the demand for assets located in the country