Suppose you observe that minor changes in supply seem to cause dramatic changes in price. You would conclude that

The price of dishwashers increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by

a. more than 1 percent. b. less than 1 percent. c. 1 percent. d. None of the above is correct; this particular price increase will not affect the GDP deflator.

Most monetarists would say that:

A. the MV = PQ equation provides a better understanding of the macroeconomy than does the C a + I g + X n + G = GDP equation. B. most changes in the price level are explainable by changes in the level of real output. C. the velocity of money is quite unstable. D. all of these are true.