Stagflation would exist when prices a. and output rise. 16. When a country's central bank increases the money supply, its a. price level rises and its currency appreciates relative to other currencies in the world. b. price level rises and its currency depreciates relative to other currencies in the world. c. price level falls and its currency appreciates relative to other currencies in the world. d. price level falls and its currency depreciates relative to other currencies in the world. b. rise and output falls. c. fall and output rises. 17. If in response to an adverse aggregate supply shock the Fed increased the money supply, a. unemployment and inflation would both be rise. b. unemployment and inflation would both fall. c. unemployment would rise and inflation would fall. d. unemployment would fall and inflation would rise. d. and output fall. 18. Suppose GDP consists of wheat and rice. In 2002, 20 bushels of wheat are sold at $4 per bushel, and 10 bushels of rice are sold at $2 per bushel. If the price of wheat was $2 per bushel and the price of rice was $1 per bushel in 2001, the base year, nominal 2002 GDP is a. $100, real 2002 GDP is $50, and the GDP deflator is 50. b. $50, real 2002 GDP is $100, and the GDP deflator is 200. c. $100, real 2002 GDP is $50, and the GDP deflator is 200. d. $40, real 2002 GDP is $100, and the GDP deflator is 50. 19. Which list contains only actions that increase the money supply? a. make open market purchases, raise the reserve requirement ratio b. make open market purchases, lower the reserve requirement ratio c. make open market sales, raise the reserve requirement ratio d. make open market sales, lower the reserve requirement ratio 10
