Question 1

If the nominal interest rate is 7 percent and expected inflation is 4.5 percent,then what is the expected real interest rate?

Accepted Answer

A)   11.5 percent
B)   7 percent
C)   4.5 percent
D)   2.5 percentE) A) and C)
F) All of the above

Question 2

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Accepted Answer

A)   excess demand for money which causes the price level to rise.
B)   excess demand for money which causes the price level to fall.
C)   excess supply of money which causes the price level to rise.
D)   excess supply of money which causes the price level to fall.E) A) and B)
F) A) and C)

Question 3

Relative-price variability is "automatic" when

Accepted Answer

A)   firms change prices only once in a while.
B)   firms change prices often.
C)   people increase the frequency of their trips to the bank.
D)   people decrease the frequency of their trips to the bank.E) B) and D)
F) None of the above

Question 4

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 5

An excess supply of money is eliminated by a decrease in the value of money.

Accepted Answer

A) True 
 B)False

Question 6

The supply of money is determined by

Accepted Answer

A)   the price level.
B)   the Treasury and Congressional Budget Office.
C)   the Federal Reserve System.
D)   the demand for money.E) A) and B)
F) None of the above

Question 7

Nominal GDP measures

Accepted Answer

A)   the total quantity of final goods and services produced.
B)   the dollar value of the economy's output of final goods and services.
C)   the total income received from producing final goods and services measured in constant dollars.
D)   None of the above is correct.E) A) and D)
F) B) and D)

Question 8

In the U.S. ,people are required to pay taxes on

Accepted Answer

A)   nominal interest earnings,irrespective of their real interest earnings.
B)   real interest earnings,irrespective of their nominal interest earnings.
C)   real capital gains,irrespective of their nominal capital gains.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 9

During the last tax year you lent money at a nominal rate of 6 percent.Actual inflation was 1 percent,but people had been expecting 1.5 percent .This difference between actual and expected inflation

Accepted Answer

A)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected.
B)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected.
C)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected.
D)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.E) None of the above
F) A) and B)

Question 10

The price level is determined by the supply of,and demand for,money.

Accepted Answer

A) True 
 B)False

Question 11

Higher inflation

Accepted Answer

A)   causes firms to change prices less frequently and makes relative prices less variable.
B)   causes firms to change prices less frequently and makes relative prices more variable.
C)   causes firms to change prices more frequently and makes relative prices less variable.
D)   causes firms to change prices more frequently and makes relative prices more variable.E) A) and C)
F) B) and C)

Question 12

Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 
-Refer to Figure 17-3.What quantity is measured along the vertical axis?

Accepted Answer

A)   the price level
B)   the velocity of money
C)   the value of money
D)   the quantity of moneyE) None of the above
F) A) and B)

Question 13

In the last part of the 1800's

Accepted Answer

A)   deflation made it harder for farmers to pay off their debt.
B)   deflation made it easier for farmers to pay off their debt.
C)   inflation made it harder for farmers to pay off their debt.
D)   inflation made it easier for farmers to pay off their debt.E) C) and D)
F) B) and C)

Question 14

Suppose the money market,drawn with the value of money on the vertical axis,is in equilibrium.If the money supply increases,then at the old value of money there is an

Accepted Answer

A)   excess demand for money that will result in an increase in spending.
B)   excess demand for money that will result in a decrease in spending.
C)   excess supply of money that will result in an increase in spending.
D)   excess supply of money that will result in a decrease in spending.E) None of the above
F) A) and D)

Question 15

Suppose that velocity rises while the money supply stays the same.It follows that

Accepted Answer

A)   P x Y must rise.
B)   P x Y must fall.
C)   P x Y must be unchanged.
D)   the effects on P x Y are uncertain.E) All of the above
F) B) and C)

Question 16

The quantity equation is M x V = P x Y.

Accepted Answer

A) True 
 B)False

Question 17

According to the classical dichotomy,which of the following is not influenced by monetary factors?

Accepted Answer

A)   the price level
B)   real GDP
C)   nominal interest rates
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 18

According to the quantity equation,the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)   either a rise in output or a rise in velocity.
B)   either a rise in output or a fall in velocity.
C)   either a fall in output or a rise in velocity.
D)   either a fall in output or a fall in velocity.E) C) and D)
F) A) and D)

Question 19

A decrease in the value of money __________ the quantity of money demanded.On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Accepted Answer

increases,a movement...

Question 20

If the number of dollars needed to buy a representative basket of goods falls,the price level

Accepted Answer

A)   falls,so the value of money falls.
B)   falls,so the value of money rises.
C)   rises,so the value of money falls.
D)   rises,so the value of money rises.E) B) and C)
F) A) and C)

Exam 30: Money Growth and Inflation

If the nominal interest rate is 7 percent and expected inflation is 4.5 percent,then what is the expected real interest rate?

Correct AnswerverifiedShow Answer

According to the quantity equation,the price level would change less than proportionately with a rise in the money supply if there were also

Correct AnswerverifiedShow Answer

In the U.S. ,people are required to pay taxes on

Correct AnswerverifiedShow Answer

If the number of dollars needed to buy a representative basket of goods falls,the price level

Correct AnswerverifiedShow Answer

According to the classical dichotomy,which of the following is not influenced by monetary factors?

Correct AnswerverifiedShow Answer

In the last part of the 1800's

Correct AnswerverifiedShow Answer

The quantity equation is M x V = P x Y.

Correct AnswerverifiedShow Answer

Suppose the money market,drawn with the value of money on the vertical axis,is in equilibrium.If the money supply increases,then at the old value of money there is an

Correct AnswerverifiedShow Answer

The price level is determined by the supply of,and demand for,money.

Correct AnswerverifiedShow Answer

During the last tax year you lent money at a nominal rate of 6 percent.Actual inflation was 1 percent,but people had been expecting 1.5 percent .This difference between actual and expected inflation

Correct AnswerverifiedShow Answer

Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-3.What quantity is measured along the vertical axis?

Correct AnswerverifiedShow Answer

A decrease in the value of money __________ the quantity of money demanded.On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Correct Answerverifiedincreases,a movement...View AnswerShow Answer

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

Correct AnswerverifiedShow Answer

The supply of money is determined by

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Correct AnswerverifiedShow Answer

Nominal GDP measures

Correct AnswerverifiedShow Answer

An excess supply of money is eliminated by a decrease in the value of money.

Correct AnswerverifiedShow Answer

Higher inflation

Correct AnswerverifiedShow Answer

Relative-price variability is "automatic" when

Correct AnswerverifiedShow Answer

Suppose that velocity rises while the money supply stays the same.It follows that

Correct AnswerverifiedShow Answer

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A decrease in the value of money the quantity of money demanded.On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

Correct Answer
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increases,a movement...
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