Author Question: Assume that the Fed increases the money supply when there is substantial unemployment in the ... (Read 44 times)

abarnes · **on:** Jun 30, 2018

Assume that the Fed increases the money supply when there is substantial unemployment in the economy. According to the quantity theory of money, if velocity is constant, then:
a. the price level will decrease.
b. real GDP will decrease.
c. nominal GDP will increase.
d. nominal GDP will decrease.
e. real GDP will remain constant while price level will decrease.

Question 2

Assume a price ceiling is imposed at the current equilibrium price in the market for wheat. If the supply of wheat then decreases as a result of bad weather,
a. a surplus of wheat will be created.
b. a shortage of wheat will be created.
c. the quantity of wheat traded remains the same.
d. the quantity of wheat supplied will increase.