1. According to the quantity theory of money, if velocity of money is constant, a 5 percent increase in money supply will lead to a 0.25 percent increase in nominal GDP.

a. True b. False

2. An increase in the money supply leads to a(n):

a. Increase in interest rates, an increase in investment, and an increase in aggregate demand.

b. Decline in interest rates, an increase in investment, and an increase in aggregate demand.

c. Decline in interest rates, a decrease in investment, and an increase in aggregate demand.

d. Decline in interest rates, a decline in investment, and a decline in aggregate demand.

e. Decline in interest rates, an increase in investment, and a decline in aggregate demand.

3. If the quantity of money supplied exceeds the quantity of money demanded, at a point in time:

a. The equilibrium interest rate will fall.

b. The money demand curve will shift to the right.

c. The money demand curve will shift to the left.

d. The equilibrium interest rate will fall.