Quiz 2 Answer Key (answer in red font)

1. Which of the following best describes the velocity of money?

A. The speed at which money moves through the economy.
B. The rate at which prices increase over time.
C. The amount of money that an individual has in their bank account.
D. The amount of money that a government spends on public goods.

2. Which of the following is an example of how an increase in the velocity of money can affect the economy?
A. A decrease in inflation rates.
B. A decrease in interest rates.
C. An increase in GDP.
D. A decrease in unemployment rates.

3. Which of the following is NOT a factor that influences the velocity of money?
A. Interest rates.
B. Government spending.
C. Consumer confidence.
D. The supply of money in the economy.

4. Which of the following best describes the relationship between the velocity of money and the money
supply?
A. They are inversely related.
B. They are directly related.
C. They have no relationship.
D. The relationship depends on the overall health of the economy.

5. What happens to the velocity of money when people start saving more?
A. It decreases.
B. It increases.
C. It stays the same.
D. It depends on the interest rate.

6. Which of the following is an example of how a decrease in the velocity of money can affect the economy?
A. An increase in inflation rates.
B. An increase in interest rates.
C. A decrease in GDP.
D. A decrease in unemployment rates.

7. Which of the following is an example of how an increase in the money supply can affect the velocity of
money?
A. It can increase the velocity of money.
B. It can decrease the velocity of money.
C. It has no effect on the velocity of money.
D. It depends on how the money is spent.

8. Which of the following is a factor that can influence the velocity of money?
A. The price of gold.
B. The exchange rate of the currency.
C. The level of government debt.
D. The ease of obtaining credit.

9. Which of the following is an example of how a decrease in the velocity of money can affect inflation?
A. It can increase inflation.
B. It can decrease inflation.
C. It has no effect on inflation.
D. It depends on the overall health of the economy.
10. Which of the following best describes demand-pull inflation?
A. Inflation caused by an increase in production costs.
B. Inflation caused by an increase in demand for goods and services.
C. Inflation caused by a decrease in the supply of money.
D. Inflation caused by an increase in the velocity of money.

11. Which of the following is an example of cost-push inflation?

A. An increase in government spending.

B. A decrease in interest rates.
C. An increase in the price of oil.
D. An increase in the money supply.

12. Which of the following best describes wage inflation?

A. Inflation caused by an increase in the cost of raw materials.
B. Inflation caused by an increase in the price of imports.
C. Inflation caused by an increase in wages.
D. Inflation caused by an increase in the value of the currency.

13. Which of the following is an example of hyperinflation?

A. An inflation rate of 3% per year.
B. An inflation rate of 10% per year.
C. An inflation rate of 50% per year.
D. An inflation rate of 100% per year.

14. Which of the following best describes the purpose of using price controls to curb inflation?
A. To increase the supply of goods and services.
B. To decrease the demand for goods and services.
C. To increase the amount of money in circulation.
D. To decrease the overall price level in the economy.

15. Which of the following factors could contribute to the collapse of a bank?
A. Poor management decisions
B. Economic downturn
C. Fraudulent activities
D. All of the above