ECO 561 Course Great Wisdom / tutorialrank.com ECO 561 Course Great Wisdom / tutorialrank.com | Page 6

C. move the economy upward along its existing investment demand
curve
D. move the economy downward along its existing investment
demand curve
25) Other things equal, a decrease in corporate income taxes will
A. decrease the market price of real capital goods
B. have no effect on the location of the investment demand curve
C. shift the investment demand curve to the right
D. shift the investment demand curve to the left
26) Inflation in U.S. prices will cause
A. an increase in the demand for U.S. dollars and an appreciation in
the exchange rate
B. an increase in the supply of U.S. dollars and a depreciation in the
exchange rate
C. a decrease in the demand for U.S. dollars and a depreciation in the
exchange rate
D. a decrease in the supply of U.S. dollars and an appreciation in the
exchange rate
27) The quantity theory of money states that
A. the money supply divided by the velocity of money equals the
price level divided by real output
B. the money supply times the velocity of money equals the price
level times real output
C. the money supply times the price level equals real output divided
by the velocity of money
D. the money supply times the price level equals real output times the
velocity of money
28) Suppose that U.S. prices rise 4% over the next year while prices
in Mexicorise 6%. According to the purchasing power parity theory of
exchange rates,what should happen to the exchange rate between the
dollar and the peso?
A. The dollar should depreciate.
B. The peso should appreciate.