Refer to Figure 30-3. Which of the following events could explain a shift of the

Question

Refer to Figure 30-3. Which of the following events could explain a shift of the money-supply curve from MS_1 to MS_2? a. an open market purchase of bonds by the Federal Reserve b. an open-market sell of bonds by the Federal Reserve c. a decrease in the price level d. None of the above is correct. 5. Monetary neutrality means that a change in the money supply a. does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run. b. does not change real GDP. Most economists think this is a good description of the economy in the long run and the short run. c. does not change real GDP. Most economists think this is a good description of the economy in the long run but not the short-run. d. does change real GDP. Most economists think this is a good description of the economy in the short run but not the long run. 6. If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent at average of 3 times per year, then according to the quantity equation, the average price level is a. $0.90 b. $1.11 c. $ 1.00. d. $133.

Explanation / Answer

a) open market purchase by federal reserve

b)The real gdp can change in the short run but not in the long run .

c) use MV=PY , then 300(3)= p*1000 = 0.90 therefore answer is part a

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