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Wrong answers have been eliminated QUESTION 1 According to the equation of exchange, if real GDP...

Wrong answers have been eliminated

QUESTION 1
According to the equation of exchange, if real GDP and money supply stays the same,
a. inflation is always zero.
b. money velocity must stay the same.
c. the rate of inflation equals the rate of change in money velocity.
d. None of the above.(Wrong)

QUESTION 2
Structural unemployment occurs because

a. workers give up looking for a job due to prolonged unemployment.
b. employers are not hiring due to bad economic and financial situations.(Wrong)
c. it takes time for people seeking jobs and employers seeking workers to find each other.
d. structural shifts in the economy eliminate certain jobs from declining sectors.

QUESTION 3
Which of the following statements is incorrect?
      
a. The SRPC shifts during a stagflation.
b. The LRPC shifts when there is a change in inflation expectations.
c. The SRPC does not shift in the short run.   
d. The LRPC shifts when there is a change in structural unemployment.(Wrong)

QUESTION 4
A decrease in government spending
      
a.decreases the interest rate and so investment spending increases.
b. increases the interest rate and so investment spending increases.   
c. increases the interest rate and so investment spending decreases.
d. decreases the interest rate and so investment spending decreases.(Wrong)

QUESTION 5
A decrease in expected inflation shifts

a. the long-run Phillips curve left.
b. both the short-run and long-run Phillips curve left.
c. neither the short-run nor long-run Phillips curve left.(Wrong)
d. the short-run Phillips curve left.

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Homework Answers

Answer #1

(1) (c)

M x V = P x Y, so

% Change in M + % Change in V = % Change in P + % Change in Y

If Y and M remains unchanged, % Change in M = % Change in Y = 0, so

% Change in V = % Change in P

(2) (d)

Structural unemployment exists due to skill and technology mismatch between employers and workers.

(3) (b)

SRPC shifts when there is a change in inflation expectation.

(4) (a)

Lower government spending lowers the need for borrowing for deficit financing purposes, therefore interest rate falls. Lower interest rate increases investment.

(5) (d)

A decrease (increase) in expected inflation shifts only the SRPC curve toward left (right).

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