Question 1

Shoeleather costs arise when higher inflation rates induce people to

Accepted Answer

A)  spend more time looking for bargains.
B)  spend less time looking for bargains.
C)  hold more money.
D)  hold less money.E) A) and B)
F) B) and D)

Question 2

The primary reason people hold money is

Accepted Answer

A)  to keep wealth in a less liquid form.
B)  to use it as a medium of exchange.
C)  to use it for investment.
D)  to earn interest.E) All of the above
F) C) and D)

Question 3

When money is neutral, which of the following increases when the money supply growth rate increases?

Accepted Answer

A)  real output growth
B)  real interest rates
C)  nominal interest rates
D)  the money supply divided by the price levelE) C) and D)
F) None of the above

Question 4

If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

Accepted Answer

A)  1.6 percent
B)  10 percent
C)  6.5 percent
D)  1.5 percentE) B) and C)
F) A) and B)

Question 5

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Accepted Answer

nominal, r...

Question 6

According to the classical dichotomy, which of the following is influenced by monetary factors?

Accepted Answer

A)  nominal wages
B)  unemployment
C)  real GDP
D)  All of the above are correct.E) All of the above
F) B) and C)

Question 7

Given U.S. tax laws, persistently high inflation may result in

Accepted Answer

A)  ​slower economic growth because the after-tax real interest rate is lower.
B)  faster economic growth because the after-tax real interest rate is higher.
C)  ​​slower economic growth because the after-tax nominal interest rate is lower.
D)  ​​faster economic growth because the after-tax nominal interest rate is higher.E) B) and D)
F) A) and D)

Question 8

If inflation is lower than what was expected,

Accepted Answer

A)  creditors receive a lower real interest rate than they had anticipated.
B)  creditors pay a lower real interest rate than they had anticipated.
C)  debtors receive a higher real interest rate than they had anticipated.
D)  debtors pay a higher real interest rate than they had anticipated.E) B) and C)
F) A) and C)

Question 9

According to the classical dichotomy, when the money supply doubles which of the following doubles?

Accepted Answer

A)  the price level and nominal GDP
B)  the price level and real GDP
C)  only real GDP
D)  only the price levelE) B) and C)
F) A) and B)

Question 10

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela...

Question 11

Inflation costs are minimized under which inflation rate?

Accepted Answer

A)  ​-20 percent
B)  5 percent
C)  ​15 percent
D)  575 percentE) A) and D)
F) A) and B)

Question 12

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

Accepted Answer

A)  Her real and nominal salary have risen.
B)  Her real and nominal salary have fallen.
C)  Her real salary has risen and her nominal salary has fallen.
D)  Her real salary has fallen and her nominal salary has risen.E) C) and D)
F) A) and B)

Question 13

Refer to Figure 30-1. If the current money supply is MS1, then

Accepted Answer

A)  equilibrium exists when the value of money is 2.
B)  equilibrium exists when the equilibrium is at point D.
C)  equilibrium exists when the value of money is 1.
D)  there is excess demand if the value of money is 2.E) C) and D)
F) All of the above

Question 14

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 15

In which of the following cases was the inflation rate 12 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 134 and now it has a value of 150.
D)  One year ago the price index had a value of 145 and now it has a value of 163.E) A) and D)
F) All of the above

Question 16

Open-market purchases by the Fed

Accepted Answer

A)  make the price level and value of money fall.
B)  make the price level rise, and make the value of money fall.
C)  make the price level and make the value of money rise.
D)  make the price level fall, and make the value of money rise.E) A) and B)
F) A) and C)

Question 17

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Accepted Answer

A)  decrease that benefited creditors at the expense of debtors.
B)  decrease that benefited debtors at the expense of creditors.
C)  increase that benefited creditors at the expense of debtors.
D)  increase that benefited debtors at the expense of creditors.E) All of the above
F) None of the above

Question 18

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Accepted Answer

A)  the quantity of money demanded and the quantity of money supplied
B)  the quantity of money demanded but not the quantity of money supplied
C)  the quantity of money supplied but not the quantity of money demanded
D)  neither the quantity of money supplied nor the quantity of money demandedE) A) and B)
F) B) and D)

Question 19

The value of money falls. This might be because the Federal Reserve

Accepted Answer

A)  bought bonds, which increased the money supply.
B)  bought bonds, which decreased the money supply.
C)  sold bonds, which increased the money supply.
D)  sold bonds, which decreased the money supply.E) C) and D)
F) A) and D)

Question 20

Nominal GDP measures output of final goods and services in physical terms.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

Nominal GDP measures output of final goods and services in physical terms.

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In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

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If inflation is lower than what was expected,

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The primary reason people hold money is

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The value of money falls. This might be because the Federal Reserve

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If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

Correct AnswerverifiedShow Answer

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

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When money is neutral, which of the following increases when the money supply growth rate increases?

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According to the classical dichotomy, when the money supply doubles which of the following doubles?

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When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

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Refer to Figure 30-1. If the current money supply is MS1, then

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The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Correct Answerverifiednominal, r...View AnswerShow Answer

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Correct AnswerverifiedWe must suppose that V is rela...View AnswerShow Answer

In which of the following cases was the inflation rate 12 percent over the last year?

Correct AnswerverifiedShow Answer

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

Correct AnswerverifiedShow Answer

Inflation costs are minimized under which inflation rate?

Correct AnswerverifiedShow Answer

Shoeleather costs arise when higher inflation rates induce people to

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is influenced by monetary factors?

Correct AnswerverifiedShow Answer

Given U.S. tax laws, persistently high inflation may result in

Correct AnswerverifiedShow Answer

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It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

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Refer to Figure 30-1. If the current money supply is MS₁, then

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The ___ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _ interest rate and the ___.

Correct Answer
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nominal, r...
View Answer

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We must suppose that V is rela...
View Answer

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