1.

Assume the economy is closed and there is no government. The aggregate demand componentsare described below: C = 100 + 0.6Y (1) I = 200 (2) i) What is the aggregate demand of equilibrium?

ii) What is the income of equilibrium?

iii) What is the consumption of equilibrium?

iv) What is the investment of equilibrium?

v) What is the multiplier?

vi) Now there is a boost in investment,and total investment is now 300. What is the income of equilibrium?

vii) Now there is a boost in investment,and total investment is now 300. What is the consumption of equilibrium?

viii) Now there is a boost in investment,and total investment is now 300. What is the autonomous spending of equilibrium?

ix) Now there is a boost in investment,and total investment is not300. What is the marginal propensity to consume?

x) There is a boost in investment making total investment now 300. What would happen if the marginal propensity to consume increases to 0.8? What is the multiplier?

xi) Suppose that a simpleeconomy has a multiplier of 2. The investment function is I=40. What is the marginal propensity to consume?

2.

When an asset is used as a universal yardstick for expressing the worth of different goods and services, it serves the function of a ____.

a) medium of exchange

b) unit of account

c) store of value

d) loanable fund

3. Hyperinflationary episodes are always related to extremely rapid growth of ____.

a) Money supply

b) Real GDP

c) Interest rates

d) Money demand

4. Before he went to college, Jon bought a car from his brother Tony. They agreed that Jon would pay Tony $10,000 when Jon graduated from college. While Jon was at college, inflation was lower than expected. Thinking only about the car transaction, this unexpectedly low inflation was ____.

a. good for Jon but bad for Tony

b. bad for both Jon and Tony

c. bad for Jon but good for Tony

d. good for both Jon and Tony

5.

A retired worker receives a pension that is not indexed to inflation. Which of the following will happen if the rate of inflation rises?

a The retiree's purchasing power will increase.

b The shareholders of the firm she worked in will lose.

c The retiree's purchasing power will fall

d The retiree will be better off.

6.

Assume that the velocity does not change over time. If real GDP grows at 1% and money supply at 2%, what is the inflation rate?

7.

In the country of Winterfell, the velocity of money is constant. GDP growth is 5% peryear, the money stock grows at 14% per year, and the nominal interest rate is 11%. Whatis the real interest rate? (Write the answer in percentage points. If you get 0.10, then write 10.)

8.

Calculate the annual inflation rate of these three cases.Input the highestinflation rate below. (Write your answer in percentage terms. If you get 0.3, then type 30.)

Case Price level last year Price level this year 1 100 110 2 250 300 W 4,000 4,040Match! The price level in 1990 was 120 while it increased to 150 by 2009. The federal minimum wage was $3.8 per hour while it reached $7.25 per hour by 2009. If your answer is 56.78%, write 56.78. Round up to the four decimal. If your answer is 0.56779, then type 56.78% Drag and drop options on the right-hand side and submit. For keyboard navigation... SHOW MORE Inflation rate for the entire period (1990-2009) E 90.79 Annualized inflation rate E Yes Wage rate increase for the entire period (1990-2009) E No Annualized wage rate change E 3.28 Wages kept up with inflation E 25 E Unclear E 1.22