Suppose the Bank of Canada increases the quantity of money. Complete the sentences. market determines the real interest rate. adjusts to make the quantity of real money supplied equal to the quantity demanded. In the long run, supply and demand in the The money; inflation rate loanable funds; nominal interest rate O A. OB. OC. loanable funds; price level O D. money; bond price

3. The classical dichotomy and the neutrality of money The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction. Poornima spends all of her money on magazines and donuts. In 2015, she earned $27.00 per hour, the price of a magazine was $9.00, and the price of a donut was $3.00. Which of the following give the nominal value of a variable? Check all that apply. O The price of a donut is $3.00 in 2015. O Poornima's wage is $27.00 per hour in 2015. O The price of a donut is 0.33 magazines in 2015. Which of the following give the real value of a variable? Check all that apply. O The price of a magazine is 3 donuts in 2015. O Poornima's wage is 9 donuts per hour in 2015. O The price of a magazine is $9.00 in 2015. Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Poornima's wage has risen to $54.00 per hour. The price of a magazine is $18.00 and the price of a donut is…

The demand for money increases and the demand for money curve shifts rightward if a. the price level falls. b. the nominal interest rate increases. the real interest rate increases. O C. O d. the inflation rate increases. O e. real GDP increases.

4 a. On the Source of funds side of the household budget constraint what 2 sources does a household have to spend 1. 2. 4b. Draw the Money Market before and after the technological growth of the late 1800s in the US 4c. What assumption makes it ok to assume the market prediction for inflation is the best guess. 4d. True / False: Super Neutrality of money says an increase in the inflation rate from 10% to 15% will harm the economy.

d

Question 37 FIGURE 1 MS P2 r2 P1 -MD2 AD MD1 Y, Y REFER TO FIGURE 1. What is measured along the horizontal axis of the left-hand graph? the opportunity cost of holding money the quantity of money O real output O nominal output

If the quantity of money supplied is greater than the quantity of money demanded, then the a. price level falls. O b. money supply decreases. C. nominal interest rate rises. d. nominal interest rate falls. O e. price of bonds falls.

90 Figure 11-1 of Value of Maney MS1 MS2 lag Meney Dem and 1 C D Quantity of Man ey Refer to the Figure 11-1. What happens when the money supply curve shifts from MS, to MS,? Select one: a. The economy's ability to produce goods and services increases. b. The demand for goods and services decreases. c. The equilibrium value of money increases. d. The equilibrium price level increases. 2.

8 During rapid inflation or hyperinflation: a. The real value of money falls. b. People will be more willing to hold their wealth in the form of money c. The use of money to undertake transactions will increase. d. The real value of money remains the same.

Interest Rate 2 MⓇ Mi Mº Quantity of Money, M 25) In the figure above, one factor NOT responsible for the decline in the demand for money is A) a decline in income. B) a decline the price level. C) an increase in income. D) a decline in the expected inflation rate.