Question 1

The quantity theory of money is expressed by the identity equation:

Accepted Answer

A) M*Y=P+Y 
B) M*V=P*Y 
C) M+V=P 
D) none of the above 
A) M*Y=P+Y 
B) M*V=P*Y 
C) M+V=P 
D) none of the above

Question 2

Which of the following events will shift the Aggregate Supply curve to the left?

Accepted Answer

A) a fall in interest rates. 
B) land costs fall. 
C) real wages rise. 
D) inflation expectations decrease. 
A) a fall in interest rates. 
B) land costs fall. 
C) real wages rise. 
D) inflation expectations decrease.

Question 3

Which one of the following is the objective of fiscal policy?

Accepted Answer

A) achieve full employment. 
B) stabilize the price level. 
C) maintain equilibrium in the Balance of Payments. 
D) all of the above 
A) achieve full employment. 
B) stabilize the price level. 
C) maintain equilibrium in the Balance of Payments. 
D) all of the above

Question 4

An economy is at equilibrium output when

Accepted Answer

A) Y = C + I + G + NX 
B) Y = AD + C + G + NX 
C) Y = AD + C + I + G + NX 
D) Y = AD + C + I + G 
A) Y = C + I + G + NX 
B) Y = AD + C + G + NX 
C) Y = AD + C + I + G + NX 
D) Y = AD + C + I + G

Question 5

An increase in aggregate demand (given no change in aggregate supply) will cause______________ inflation.

Accepted Answer

A) constant 
B) higher 
C) lower 
D) none of the above 
A) constant 
B) higher 
C) lower 
D) none of the above

Question 6

Which of the following items is an investment?

Accepted Answer

A) purchase of a mutual fund. 
B) purchase of a U.S. government bond. 
C) purchase of a new farm tractor. 
D) purchase of a stock. 
A) purchase of a mutual fund. 
B) purchase of a U.S. government bond. 
C) purchase of a new farm tractor. 
D) purchase of a stock.

Exam 1: Macroeconomic Concepts and Policies