QUESTION 1 MV = PQ M = 200,000 V = 5 Q = 10,000 P = 100 QUESTION 2 01. Given the above model, what will happen if the amount of money in circulation decreases to 100,000 (as a result of a collapse of the banking system)? O a) Output level will increase to 15,000 Ob) Output level will remain unchanged O c) Output level will decrease to 5,000 Od) None of the above. MV = PQ V = 2 Q = 1000 P=1 QUESTION 3 (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Quantity of money in circulation is 200,000 Velocity is equal to 5 and is constant expenditures, income Output is equal to 10,000 and the economy is at full employment Price is equal to 100, and is constant 02. Given the above model, what will happen to the price if the central bank increases quantity of money in circulation from 500 to 1000? a) Price will decrease from 1 to 1/2 Ob) Price will increase from 1 to 5 Oc) Price will increase from 1 to 2 O d) Price will remain unchanged Oe) none of the above. (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Velocity is equal to 2 and is constant Output is equal to 1000 and the economy is at full employment Price is equal to 1 and is VARIABLE 03. What is the "mpc"? (a) 1/3 Ⓒ (b) 2/3 (c) 3/2 (d) 1/2 (e) 4 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 "O income: Q STII Q 10 20 30 40 50 60 70 80 90 100 110 120 I
QUESTION 1 MV = PQ M = 200,000 V = 5 Q = 10,000 P = 100 QUESTION 2 01. Given the above model, what will happen if the amount of money in circulation decreases to 100,000 (as a result of a collapse of the banking system)? O a) Output level will increase to 15,000 Ob) Output level will remain unchanged O c) Output level will decrease to 5,000 Od) None of the above. MV = PQ V = 2 Q = 1000 P=1 QUESTION 3 (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Quantity of money in circulation is 200,000 Velocity is equal to 5 and is constant expenditures, income Output is equal to 10,000 and the economy is at full employment Price is equal to 100, and is constant 02. Given the above model, what will happen to the price if the central bank increases quantity of money in circulation from 500 to 1000? a) Price will decrease from 1 to 1/2 Ob) Price will increase from 1 to 5 Oc) Price will increase from 1 to 2 O d) Price will remain unchanged Oe) none of the above. (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Velocity is equal to 2 and is constant Output is equal to 1000 and the economy is at full employment Price is equal to 1 and is VARIABLE 03. What is the "mpc"? (a) 1/3 Ⓒ (b) 2/3 (c) 3/2 (d) 1/2 (e) 4 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 "O income: Q STII Q 10 20 30 40 50 60 70 80 90 100 110 120 I
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![# Economics Practice Questions
## Question 1
**Equation:**
\[ MV = PQ \]
(\( \text{Quantity of Money in circulation} \) \(\times\) \( \text{Velocity of money} \) = \( \text{Price} \) \(\times\) \( \text{Real output} \))
- \( M = 200,000 \): Quantity of money in circulation is 200,000
- \( V = 5 \): Velocity is equal to 5 and is constant
- \( Q = 10,000 \): Output is equal to 10,000 and the economy is at full employment
- \( P = 100 \): Price is equal to 100, and is constant
### Question:
Given the above model, what will happen if the amount of money in circulation decreases to 100,000 (as a result of a collapse of the banking system)?
- A) Output level will increase to 15,000
- B) Output level will remain unchanged
- C) Output level will decrease to 5,000
- D) None of the above.
## Question 2
**Equation:**
\[ MV = PQ \]
(\( \text{Quantity of Money in circulation} \) \(\times\) \( \text{Velocity of money} \) = \( \text{Price} \) \(\times\) \( \text{Real output} \))
- \( V = 2 \): Velocity is equal to 2 and is constant
- \( Q = 1000 \): Output is equal to 1000 and the economy is at full employment
- \( P = 1 \): Price is equal to 1 and is VARIABLE
### Question:
Given the above model, what will happen to the price if the central bank increases quantity of money in circulation from 500 to 1000?
- A) Price will decrease from 1 to 1/2
- B) Price will increase from 1 to 5
- C) Price will increase from 1 to 2
- D) Price will remain unchanged
- E) None of the above.
## Question 3
**Graph Explanation:**
The graph plots expenditures against income (\( Q \)) with three lines representing different economic functions: \( Q \), \( C \), and \( S \).
- **Q**: A straight](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8fd71a05-cce6-42ce-8872-636d0d92cbc9%2Fa1a9fe6e-7479-425e-b31e-3c0a2d9e7dd9%2Fiembb1_processed.png&w=3840&q=75)
Transcribed Image Text:# Economics Practice Questions
## Question 1
**Equation:**
\[ MV = PQ \]
(\( \text{Quantity of Money in circulation} \) \(\times\) \( \text{Velocity of money} \) = \( \text{Price} \) \(\times\) \( \text{Real output} \))
- \( M = 200,000 \): Quantity of money in circulation is 200,000
- \( V = 5 \): Velocity is equal to 5 and is constant
- \( Q = 10,000 \): Output is equal to 10,000 and the economy is at full employment
- \( P = 100 \): Price is equal to 100, and is constant
### Question:
Given the above model, what will happen if the amount of money in circulation decreases to 100,000 (as a result of a collapse of the banking system)?
- A) Output level will increase to 15,000
- B) Output level will remain unchanged
- C) Output level will decrease to 5,000
- D) None of the above.
## Question 2
**Equation:**
\[ MV = PQ \]
(\( \text{Quantity of Money in circulation} \) \(\times\) \( \text{Velocity of money} \) = \( \text{Price} \) \(\times\) \( \text{Real output} \))
- \( V = 2 \): Velocity is equal to 2 and is constant
- \( Q = 1000 \): Output is equal to 1000 and the economy is at full employment
- \( P = 1 \): Price is equal to 1 and is VARIABLE
### Question:
Given the above model, what will happen to the price if the central bank increases quantity of money in circulation from 500 to 1000?
- A) Price will decrease from 1 to 1/2
- B) Price will increase from 1 to 5
- C) Price will increase from 1 to 2
- D) Price will remain unchanged
- E) None of the above.
## Question 3
**Graph Explanation:**
The graph plots expenditures against income (\( Q \)) with three lines representing different economic functions: \( Q \), \( C \), and \( S \).
- **Q**: A straight
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