2. Economic models Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×MP=A×M • P=Price LevelP=Price Level • M=Money SupplyM=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time.A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level? A- An economist would look for data on past changes in the money supply and note the resulting changes in the price level. B- Economists do not usually develop theoretical models of the economy but only analyze summary statistics about the current state of the economy. C- Unlike researchers in the hard sciences, economists cannot study complex relationships using data. D- An economist would persuade the Federal Reserve to change the money supply to various levels, and observe the resulting changes in the price level.
2. Economic models Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×MP=A×M • P=Price LevelP=Price Level • M=Money SupplyM=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time.A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level? A- An economist would look for data on past changes in the money supply and note the resulting changes in the price level. B- Economists do not usually develop theoretical models of the economy but only analyze summary statistics about the current state of the economy. C- Unlike researchers in the hard sciences, economists cannot study complex relationships using data. D- An economist would persuade the Federal Reserve to change the money supply to various levels, and observe the resulting changes in the price level.
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
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12. Economic models
Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship:
P=A×MP=A×M
| • | P=Price LevelP=Price Level |
| • | M=Money SupplyM=Money Supply |
| • | A=A composite of other factors, including real GDP, that change very slowly over time.A=A composite of other factors, including real GDP, that change very slowly over time. |
How might an economist gather empirical data to test the proposed relationship between money and the price level?
A- An economist would look for data on past changes in the money supply and note the resulting changes in the price level.
B- Economists do not usually develop theoretical models of the economy but only analyze summary statistics about the current state of the economy.
C- Unlike researchers in the hard sciences, economists cannot study complex relationships using data.
D- An economist would persuade the Federal Reserve to change the money supply to various levels, and observe the resulting changes in the price level.
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