Name: _ Date: _1.The rate of inflation is the:A)median level of prices.B)average level of prices.C)percentage change in the level of prices.D)measure of the overall level of prices.2.The definition of the transactions velocity of money is:A)money multiplied by prices divided by transactions.B)transactions divided by prices multiplied by money.C)money divided by prices multiplied by transactions.D)prices multiplied by transactions divided by money.3.If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is _ times per year.A)0.2B)2C)5D)104.If the transactions velocity of money remains constant while the quantity of money doubles, the:A)price of the average transaction must double.B)number of transactions must remain constant.C)price of the average transaction multiplied by the number of transactions must remain constant.D)price of the average transaction multiplied by the number of transactions must double.5.The quantity equation, viewed as an identity, is a definition of the:A)quantity of money.B)quantity of transactions.C)price level.D)transactions velocity of money.6.The income velocity of money:A)is defined in the identity MV = PY.B)is defined in the identity MV = PT.C)is the same thing as the transactions velocity of money.D)is the same as the number of times a dollar bill changes hands.7.The transactions velocity of money indicates the _ in a given period, while the income velocity of money indicates the _ in a given period.A)number of transactions; amount of income earnedB)quantity of money used for transactions; quantity of money paid as incomeC)number of times a dollar bill changes hands; number of times a dollar bill enters someones incomeD)volume of transactions; flow of income8.Real money balances equal the:A)sum of coin, currency, and balances in checking accounts.B)amount of money expressed in terms of the quantity of goods and services it can purchase.C)number of dollars used as a medium of exchange.D)quantity of money created by the Federal Reserve.9.If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal:A)10.B)20,000.C)200,000.D)2,000,000.10.The demand for real money balances is generally assumed to:A)be exogenous.B)be constant.C)increase as real income increases.D)decrease as real income increases.11.If the quantity of real money balances is kY, where k is a constant, then velocity is:A)k.B)1/k.C)kP.D)P/k.12.If the demand for real money balances is proportional to real income, velocity will:A)increase as income increases.B)increase as income decreases.C)vary directly with the interest rate.D)remain constant.13.When the demand for money parameter, k, is large, the velocity of money is _ and money is changing hands _A)large; frequentlyB)large; infrequentlyC)small; frequentlyD)small; infrequently14.Consider the money demand function that takes the form (M/P)d = kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is constant, what is the average inflation rate in this economy?A)3 percentB)7 percentC)10 percentD)13 percent15.The income velocity of money increases and the money demand parameter k _ when people want to hold _ money.A)increases; moreB)increases; lessC)decreases; moreD)decreases; less16.The quantity equation for money, by itself:A)may be thought of as a definition for velocity of money.B)implies that the velocity of money is constant.C)implies that the price level is proportional to the money supply.D)implies that real gross domestic product (GDP) is proportional to the money supply.17.The quantity theory of money assumes that:A)income is constant.B)velocity is constant.C)prices are constant.D)the money supply is constant.18.If income velocity is assumed to be constant, but no other assumptions are made, the level of _ is determined by M.A)pricesB)incomeC)transactionsD)nominal GDP19.If velocity is constant and, in addition, the factors of production and the production function determine real GDP, then:A)the price level is proportional to the money supply.B)real GDP is proportional to the money supply.C)the price level is fixed.D)nominal GDP is fixed.20.In the long run, according to the quant