Question

In the long run, an increase in the aggregate price level:

Multiple Choice

• increases real output.

• increases spending.

• decreases real output.

• doesn't change real output.

Inflation is an overall:

Multiple Choice

• decline in prices in the economy, excluding those with historically volatile price changes.

• decline in prices in the economy.

• rise in prices in the economy, excluding those with historically volatile price changes.

• rise in prices in the economy.

The aggregate price level is:

Multiple Choice

• a measure of the average price level for GDP.

• measured by the CPI.

• measured by the GDP price deflator.

• All of these statements are true.

Nominal output is the _________ of goods and services, and real output is the _______ of goods and services .

Multiple Choice

• actual amount; dollar value with inflation

• dollar value; actual amount

• actual amount; dollar value

• dollar value with inflation; dollar value

If an economy produces 2,000 units of output with a price level of $2 and the money supply (M) is $1,000, velocity is:

Multiple Choice

• 1.

• 2.

• 4.

• 500.

Cost push inflation rev: 10_31_2017_QC_ CS-107652

Multiple Choice

• price of a key input increases suddenly.

• business cycle becomes sporadic and unpredictable.

• price of necessity goods increases suddenly.

• price level changes in response to changes in the business cycle.

Answer 1

1. In the long run , an increase in the aggregate price level doesn't change real output. Hence,option(D) is correct.

2. Inflation is an overall rise in prices in the economy. Hence, option(D) is correct.

3. The aggregate price level is measured by the CPI. Hence, option(B) is correct.

4. Nominal output is the actual amount of goods and services and real output is the dollar amount with inflation of goods and services.

5. MV=PY

(1000)(V)= (2)(2000)

V = 4000/1000 = 4

Velocity is 4 . Hence,option(C) is correct.

6. When the price of a key input increases suddenly , it causes Cost Push inflation. Hence,option(A) is correct.