The classical approach to macroeconomics assumes that
A) wages, but not prices, adjust quickly to balance quantities supplied and demanded in markets.
B) wages and prices adjust quickly to balance quantities supplied and demanded in markets.
C) prices, but not wages, adjust quickly to balance quantities supplied and demanded in markets.
D) neither wages nor prices adjust quickly to balance quantities supplied and demanded in markets.
B
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The velocity of circulation grows at 1 percent and real GDP grows at 3 percent. If the quantity of money grows at 4 percent, the inflation rate is
A) 8 percent. B) 4 percent. C) zero. D) 2 percent. E) 10 percent.
If an increase in government spending of $20 million results in a $100 million increase in GDP, then the spending multiplier is
A) 0.2. B) 2.5. C) 5. D) 20.