Tackle the Test: Multiple-Choice Questions

1. Question

   In the long run, changes in the quantity of money affect which of the following?

   
   

   
   

   1. real aggregate output

      
      
   
   

   2. interest rates

      
      
   
   

   3. the aggregate price level

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   In the long run, changes in the quantity of money affect which of the following?

2. Question

   An increase in the money supply will lead to which of the following in the short run?

   A.

   higher interest rates

   B.

   decreased investment spending

   C.

   decreased consumer spending

   D.

   increased aggregate demand

   E.

   lower real GDP

   An increase in the money supply will lead to which of the following in the short run?

3. Question

   A 10% decrease in the money supply will change the aggregate price level in the long run by

   A.

   zero.

   B.

   less than 10%.

   C.

   10%.

   D.

   20%.

   E.

   more than 20%.

   A 10% decrease in the money supply will change the aggregate price level in the long run by

4. Question

   Monetary neutrality means that, in the long run, changes in the money supply

   A.

   cannot happen.

   B.

   have no effect on the economy.

   C.

   have no real effect on the economy.

   D.

   increase real GDP.

   E.

   change real interest rates.

   Monetary neutrality means that, in the long run, changes in the money supply

5. Question

   A graph of percentage increases in the money supply and average annual increases in the price level for various countries provides evidence that

   A.

   changes in the two variables are exactly equal.

   B.

   the money supply and aggregate price level are unrelated.

   C.

   money neutrality holds only in wealthy countries.

   D.

   monetary policy is ineffective.

   E.

   money is neutral in the long run.

   A graph of percentage increases in the money supply and average annual increases in the price level for various countries provides evidence that