Question 1

Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Accepted Answer

A)   People who held money would feel poorer.
B)   Prices would rise.
C)   People who had lent money at a fixed interest rate would feel poorer.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 2

U.S.tax laws allow taxpayers,in computing the amount of tax they owe,to use the real value,as opposed to the nominal value,of

Accepted Answer

A)   both interest income and capital gains.
B)   interest income but not capital gains.
C)   capital gains but not interest income.
D)   neither interest income nor capital gains.E) B) and C)
F) A) and D)

Question 3

Suppose the nominal interest rate is 10 percent,the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Accepted Answer

A) True 
 B)False

Question 4

Fifteen years ago your parents purchased some land with the idea of selling it later to help pay your college expenses.They purchased the land for $100,000.They sold if for $180,000.During the time they held it the price level rose from 80 to 120.If your parents face a 25% tax rate,what was their real after-tax gain? (Hint: What's the real value of the land in current prices?)

Accepted Answer

The answer of Fifteen years ago your parents purchased some...

Question 5

The quantity theory of money implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Accepted Answer

A) True 
 B)False

Question 6

Which country is correctly matched with its 2009 inflation rate?

Accepted Answer

A)   9 percent inflation in the United States
B)   -1 percent inflation in Russia
C)   25 percent inflation in Venezuela
D)   2 percent inflation in JapanE) A) and B)
F) A) and C)

Question 7

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 8

One study found that unemployment is the economic term mentioned most often in U.S.newspapers.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the Fed sells government bonds.Use a graph of the money market to show what this does to the value of money.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the Fed sells government bonds,the...

Question 10

In which of the following cases was the inflation rate 10 percent over the last year?

Accepted Answer

A)   One year ago the price index had a value of 110 and now it has a value of 120.
B)   One year ago the price index had a value of 120 and now it has a value of 132.
C)   One year ago the price index had a value of 126 and now it has a value of 140.
D)   One year ago the price index had a value of 145 and now it has a value of 163.E) A) and C)
F) A) and B)

Question 11

Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same?

Accepted Answer

A)   menu costs
B)   inflation tax
C)   shoeleather costs
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 12

During the recent financial crisis velocity decreased.This means that the rate at which money changed hands

Accepted Answer

A)   decreased.Other things the same,a decrease in velocity decreases the price level.
B)   decreased.Other things the same,a decrease in velocity increases the price level.
C)   increased.Other things the same,an increase in velocity decreases the price level.
D)   increased.Other things the same,an increase in velocity increases the price level.E) B) and C)
F) A) and D)

Question 13

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Accepted Answer

A)   7 percent
B)   5.5 percent
C)   1.75 percent
D)   1.5 percentE) A) and C)
F) B) and C)

Question 14

The money demand curve shifts to the left when the Fed buys government bonds.

Accepted Answer

A) True 
 B)False

Question 15

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Accepted Answer

A) True 
 B)False

Question 16

The principle of monetary neutrality implies that an increase in the money supply will

Accepted Answer

A)   increase real GDP and the price level.
B)   increase real GDP,but not the price level.
C)   increase the price level,but not real GDP.
D)   increase neither the price level nor real GDP.E) A) and B)
F) A) and C)

Question 17

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest...

Question 18

Between 1880 and 1896 the average level of prices in the U.S.economy

Accepted Answer

A)   fell 23 percent.
B)   fell 4 percent.
C)   rose 23 percent.
D)   rose 50 percent.E) C) and D)
F) None of the above

Question 19

The price level rises if either

Accepted Answer

A)   money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a rise in the value of money.
B)   money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a fall in the value of money.
C)   money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a rise in the value of money.
D)   money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a fall in the value of money.E) A) and B)
F) None of the above

Question 20

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Accepted Answer

A)   inflation,nominal interest rates,and real interest rates.
B)   inflation and nominal interest rates,but does not change real interest rates.
C)   inflation and real interest rates,but does not change nominal interest rates.
D)   neither inflation,nominal interest rates,or real interest rates.E) A) and B)
F) A) and C)

Exam 30: Money Growth and Inflation

One study found that unemployment is the economic term mentioned most often in U.S.newspapers.

Correct Answer
verified

The quantity theory of money implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct Answer
verified

Between 1880 and 1896 the average level of prices in the U.S.economy

Correct Answer
verified

In which of the following cases was the inflation rate 10 percent over the last year?

Correct Answer
verified

The principle of monetary neutrality implies that an increase in the money supply will

Correct Answer
verified

Suppose the Fed sells government bonds.Use a graph of the money market to show what this does to the value of money.

Correct Answer
verified
When the Fed sells government bonds,the...
View Answer

Correct Answer
verified

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Correct Answer
verified

During the recent financial crisis velocity decreased.This means that the rate at which money changed hands

Correct Answer
verified

Which country is correctly matched with its 2009 inflation rate?

Correct Answer
verified

Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Correct Answer
verified

Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same?

Correct Answer
verified

The money demand curve shifts to the left when the Fed buys government bonds.

Correct Answer
verified

Suppose the nominal interest rate is 10 percent,the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Correct Answer
verified

U.S.tax laws allow taxpayers,in computing the amount of tax they owe,to use the real value,as opposed to the nominal value,of

Correct Answer
verified

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Correct Answer
verified

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct Answer
verified
Inflation and nominal interest...
View Answer

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct Answer
verified

The price level rises if either

Correct Answer
verified

Exam 30: Money Growth and Inflation

One study found that unemployment is the economic term mentioned most often in U.S.newspapers.

Correct AnswerverifiedShow Answer

The quantity theory of money implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct AnswerverifiedShow Answer

Between 1880 and 1896 the average level of prices in the U.S.economy

Correct AnswerverifiedShow Answer

In which of the following cases was the inflation rate 10 percent over the last year?

Correct AnswerverifiedShow Answer

The principle of monetary neutrality implies that an increase in the money supply will

Correct AnswerverifiedShow Answer

Suppose the Fed sells government bonds.Use a graph of the money market to show what this does to the value of money.

Correct Answerverified When the Fed sells government bonds,the...View AnswerShow Answer

Correct AnswerverifiedShow Answer

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Correct AnswerverifiedShow Answer

During the recent financial crisis velocity decreased.This means that the rate at which money changed hands

Correct AnswerverifiedShow Answer

Which country is correctly matched with its 2009 inflation rate?

Correct AnswerverifiedShow Answer

Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Correct AnswerverifiedShow Answer

Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same?

Correct AnswerverifiedShow Answer

The money demand curve shifts to the left when the Fed buys government bonds.

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate is 10 percent,the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Correct AnswerverifiedShow Answer

U.S.tax laws allow taxpayers,in computing the amount of tax they owe,to use the real value,as opposed to the nominal value,of

Correct AnswerverifiedShow Answer

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Correct AnswerverifiedShow Answer

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Correct AnswerverifiedShow Answer

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct AnswerverifiedInflation and nominal interest...View AnswerShow Answer

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct AnswerverifiedShow Answer

The price level rises if either

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the Fed sells government bonds,the...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified

Correct Answer
verified
Inflation and nominal interest...
View Answer

Correct Answer
verified

Correct Answer
verified