1- If the money supply and the velocity of money are fixed, then increases in re

Question

1-

If the money supply and the velocity of money are fixed, then increases in real GDP:

Select one:

a. are impossible because real GDP must also be fixed.

b. cause increases in the price level.

c. cause decreases in the price level.

d. occur without changes in the price level.

2-

The velocity of money is:

Select one:

a. how fast the price level is rising.

b. how fast the inflation rate is rising.

c. the rate at which money can be printed.

d. the average number of times a dollar is spent on final goods and services.

3-

A real price is the price:

Select one:

a. that consumers really pay.

b. after adjusting for any discounts.

c. after adding any additional finance charges.

d. that has been corrected for inflation.

4-

A real price is the price:

Select one:

a. that consumers really pay.

b. after adjusting for any discounts.

c. after adding any additional finance charges.

d. that has been corrected for inflation.

5-

When actual inflation is equal to expected inflation:

Select one:

a. borrowers are harmed and lenders benefit.

b. lenders are harmed and borrowers benefit.

c. both borrowers and lenders are harmed.

d. neither borrowers nor lenders are harmed.

Explanation / Answer

1. Ans: b) cause increases in the price level.

2. Ans : d) the average number of times a dollar is spent on final goods and services.

3. Ans: d ) that has been corrected for inflation.

4. Ans : d) that has been corrected for inflation.

5. Ans : d. neither borrowers nor lenders are harmed.

Explanation :

If the actual inflation rate is less than the expected inflation rate , then the lenders will be benefited whereas the borrower will be harmed and vice versa.

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