1. In the short run, an increase in the growth rate of the quantity of money ________ the nominal interest rate and in the long run it ________ the nominal interest rate.

Select one:

a.does not change; raises

b.raises; lowers

c.raises; raises

d.lowers; raises

e.lowers; lowers

2.In the money market, if the price level rises, then the demand for money ________ and the equilibrium nominal interest rate ________.

Select one:

a.decreases; falls

b.decreases; rises

c.increases; does not change

d.increases; rises

e.increases; falls

3.In a period of hyperinflation, the velocity of circulation increases because

Select one:

a.the real interest rate rises.

b.potential GDP increases.

c.the nominal interest rate decreases.

d.households and firms spend money as soon as they receive payment.

e.money is valuable everyone wants it.

4.If the Fed wants to raise the interest rate, in the short run in the money market the Fed

Select one:

a.shifts the demand for money curve leftward.

b.decreases the quantity of money.

c.shifts the demand for money curve rightward.

d.increases the quantity of money.

e.directly raises the interest rate and does nothing to either the supply of money or the demand for money.

5.If real GDP grows by 3 percent, the velocity of circulation grows by 4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

Select one:

a.-4 percent.

b.7 percent.

c.10 percent.

d.0 percent.

e.4 percent.