Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 12, Problem 3QR
To determine
Nominal and real variables.
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What are the differences between the Fisherian and Cambridge versions of the quantity theory of money? In the Classical model, what role does money have in determining output, employment, the price level and the interest rate ? Show by diagrams.
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.Frances spends all of her money on magazines and mandarins. In 2015, she earned $15.00 per hour, the price of a magazine was $5.00, and the price of a mandarin was $3.00.
Which of the following gives the nominal value of a variable? Check all that apply.
a) Frances's wage is 3 magazines per hour in 2015.
b) The price of a mandarin is 0.6 magazines in 2015.
c) Frances's wage is $15.00 per hour in 2015.
Which of the following give the real value of a variable? Check all that apply.
a) Frances's wage is $15.00 per hour in 2015.
b) The price of a magazine is $5.00 in 2015.
c) Frances's wage is 5 mandarins per hour in 2015.
Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Frances's wage has risen to $30.00 per…
According to the quantity theory of money,
a. V and M are constant.
b. V and Y are not affected by the quantity of money.
c. V and P are not affected by the quantity of money.
d. V and M are not affected by changes in the price level.
Chapter 12 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
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Similar questions
Explain the quantity theory of money and explain how the money demand, money supply, and quantity of money are related to each other? Which variable (s) will be affected if the money supply increases in the economy? Take in context to what has been happening in the U.S economy in the past few years.
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Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes
both the short run and the long run.
the short run, but not the long run.
the long run, but not the short run.
neither the long run nor the short run
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Suppose banks require a real interest rate of 12 percent. If they expect inflation to be 3 percent, what is the nominal interest rate?
Multiple Choice
36 percent
15 percent
9 percent
4 percent
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