Potential output for an economy is 900, velocity is 6, and the current money sup

Question

Potential output for an economy is 900, velocity is 6, and the current money supply (Year 1) is 1,800. Θ = 50. Decision makers expect a 6% increase in the money supply; the actual increase is 3%.

2. What is the current price level?

a. 8 b. 10 c. 12 d. 14 e. 15

3. What is the expected money supply in Year 2?

a. 1,692

b. 1,746

c 1,854

d 1,908

e. 2,018

4. What is the actual money supply in Year 2?

a. 1,692

b. 1,746

c 1,854

d 1,908

e. 2,018

5. What is the expected price level for Year 2?

a. 12.25

b. 12.36

c. 12.50

d. 12.72

e. 13.00

6. What is the actual price level for Year 2?

a. 12.25

b. 12.36

c. 12.50

d. 12.72

e. 13.00

7. What is the expected inflation rate for Year 2?

a. 3%

b. 4%

c. 6%

d. 7%

e. 8%

8. What is the actual inflation rate for Year 2?

a. 3%

b. 4%

c. 6%

d. 7%

e. 8%

9. What is Year 2 short-run output?

a. 873

b. 882

c. 918

d. 927

e. 954

Use the following answers to indicate whether each of the following transactions would be included in the current account(CA) or the capital account(KA) in the U.S. Balance of Payments, and the affect upon the appropriate account.

a) CA; Debit(-)

b) CA; Credit(+)

c) KA; Debit(-)

d) KA; Credit(+)

52. A U.S. retiree living in Mexico receives a pension check.

53. U.S. citizens buy stock in Sony Corporation.

54. Sony Corporation sells a Discman to a U.S. citizen.

55. Joe, who works in Japan, sends some money to his mother in Lexington.

56. A U.S. insurance company sells a policy to a Japanese resident.

57. Joe’s mother visits him in Japan for six months.

58. A Japanese bank purchases U.S. Treasury bills.

59. A Saudi oil sheik buys California real estate.

60. A Mexican citizen working in the U.S. sends money to his family in Mexico.

61. Ford sells cars to Japan.

Explanation / Answer

2 b

3 a

4e

5c

6d

7c

8a

9b

52 c

53a

54b

55b

56c

57a

58c

59a

60c

61b

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