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In the Long Run, Any Given Percentage Increase in the Money

Question 19
Multiple Choice

In the long run, any given percentage increase in the money supply: A) decreases real GDP. B) leads to an equal percentage increase in the overall price level. C) increases real GDP. D) leads to an equal percentage decrease in the unemployment rate.

Related questions
Q 20
If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _____% and real GDP _____. A) 10; increases by 10% B) 5; increases by 5%, according to Okun's law C) 10; returns to the potential level of output D) 5; increases by 20%, given a marginal propensity to consume of 0.5
Q 21
The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____. A) money is neutral in the long run; do not consider money to be neutral in the long run. B) the adjustment of prices takes some time; expect changes in the money supply to be instantaneous. C) did not consider money to be neutral in the long run; consider money neutral in the long run. D) the adjustment of prices to changes in the money supply is instantaneous; argue that this adjustment process takes some time.
Q 22
Historical evidence has led economists to conclude that during periods of high inflation, the _____ model of the price level is a good approximation of reality because nominal wages and prices adjust more _____ than during periods of low inflation. A) classical; quickly B) modern; slowly C) classical; slowly D) modern; quickly
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