1. The definition of the transactions velocity of money is

		money multiplied by prices divided by transactions
		transactions divided by prices multiplied by money
		money divided by prices multiplied by transactions
		prices multiplied by transactions divided by money

2."According to the quantity theory of money and the Fisher equation, in the long run an increase in money growth increases"

		output
		velocity
		the nominal interest rate
		the real interest rate

3.Relative purchasing power parity (PPP) tells us that the euro would appreciate relative to the dollar if EU inflation is _____ than US inflation and EU nominal interest rates are _____ than US nominal interest rates.

		higher ; higher
		higher ; lower
		lower ; higher
		lower ; lower

1. points

4.There is empirical evidence of absolute price level convergence between developed and developing countries.

True

False

5.Use the DD-AA model of aggregate demand to answer questions a-c***

Suppose the Federal Reserve implements large-scale open market sales. This causes US short-term interest rates to _____.

		fall
		rise
		remain constant

1. points

b***Use the DD-AA model of aggregate demand to answer questions a-c***

This will cause the dollar to _____.

		appreciate
		depreciate
		remain constant

1. points

c***Use the DD-AA model of aggregate demand to answer questions 23-25***

The US AA curve will shift _____ and US income will _____.

		upward ; rise
		upward ; fall
		downward ; rise
		downward ; fall