As the graph illustrates, consumers are worried about the future and have begun saving more money. If the Fed does not intervene in this situation, what will happen to the price level in the long run?
Prices will increase.
Prices will stay the same.
Prices will decrease.
There is insufficient information to answer the question.
(24)
Which of the following correctly expresses the quantity theory of money?
money x the price level = velocity x real output
money x velocity = price level x real output
velocity x real output = price level x money
price level x velocity = real output
(25)
In the real business cycle theory, if long-run aggregate supply increases, then long-run aggregate demand increases by
an equal amount, so that real output increases and the price level remains unchanged.
less than the amount of increase in aggregate supply, so that real output increases and the price level decreases.
more than the amount of increase in aggregate supply, so that real output increases and the price level increases.
an equal amount, so that both real output and the price level increase.
(26)
The quantity equation is MV = PY. Monetarists believe that if M increases, _________________, while new Keynesians believe that if M increases, _________________.
only P increases; only Y increases
only P increases; both P and Y increase
both P and Y increase; only P increases
both P and Y increase; only Y increases
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