Suppose the velocity of money is 6, the amount of money in circulation is $600 billion, the index of prices is 180, and real GDP is $20 billion. According to the strict quantity theory of money, if the money supply decreased to $300 billion,
a. the velocity of money would rise to 12.
b. the index of prices would fall to 90.
c. real GDP would decrease to $10 billion.
d. the velocity of money would decline to 3.
B
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Suppose the quantity demanded of milk increases by 15% when milk prices are decreased by 3%. The price elasticity of demand for milk is
A) elastic and equal to 0.2. B) inelastic and equal to 0.2. C) elastic and equal to 5. D) inelastic and equal to 5.
Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the
a. base of the triangle that represents the deadweight loss doubles. b. height of the triangle that represents the deadweight loss doubles. c. deadweight loss of the tax quadruples. d. All of the above are correct.