Classical economists believe that:
A. velocity is not constant.
B. changes in the money supply affect real GDP.
C. the quantity of money explains prices.
D. the money supply affects velocity.
Answer: C
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An increase in labor productivity
A) increases the standard of living. B) might be the result of an increase in the quantity of labor. C) generally occurs when physical capital decreases because firms must then hire more workers. D) cannot occur without a corresponding increase in employment. E) decreases the standard of living.
Under a fixed exchange rate system, an expansionary fiscal policy is
A) more effective in an open economy than in a closed economy. B) less effective in an open economy than in a closed economy. C) equally effective in an open economy and in a closed economy. D) marginally effective in an open economy and completely ineffective in a closed economy.