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2. In the equation Md = kY - hi, where Md is money demand, the parameter k captures _____

  • the effects of inflation
  • the transactions demand for money
  • the speculative demand for money
  • the money supply
  • the total demand for money

3. Cyclical unemployment is:

  • short-term unemployment that is associated with the process of matching workers with jobs.
  • the extra unemployment that occurs during periods of recession
  • long-term and chronic unemployment that exists even when the economy is producing at a normal rate.
  • the additional unemployment not captured in official statistics resulting from discouraged workers and the involuntary part-time workers.
  • the unemployment that results when people retire or leave the labour force

4. A decrease in the money supply leads to a _____ equilibrium value of ______

  • unchanged ; both Y and i
  • higher: i
  • higher ; Y
  • higher ; both Y and i
  • lower ; both Y and i

5. The key assumption of the basic Keynesian model is that in the short run firms ______.

  • meet demand at preset prices
  • operate just as they do in the long run
  • adjust prices to bring sales in line with capacity
  • change prices frequently
  • produce potential output
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