Question 1

Based on the quantity equation,if M = 100,V = 3,and Y = 200,then P =

Accepted Answer

A)  1.
B)  1.5.
C)  2.
D)  None of the above is correct.E) B) and C)
F) B) and D)

Question 2

The quantity theory of money can explain hyperinflations but not moderate inflation.

Accepted Answer

A) True 
 B)False

Question 3

When the money supply and the price level in countries that experienced hyperinflation are plotted against time,we see that

Accepted Answer

A)  the price level grew at about the same rate as the money supply.
B)  the price level grew at a much faster rate than the money supply.
C)  the price level grew at a much slower rate than the money supply.
D)  the inflation rate and the money supply growth rate do not appear to be related.E) A) and C)
F) None of the above

Question 4

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Accepted Answer

Relative prices are the value of one goo...

Question 5

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Accepted Answer

A) True 
 B)False

Question 6

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Accepted Answer

A) True 
 B)False

Question 7

As inflation rises,people will tend to

Accepted Answer

A)  go to the bank more often.This is known as menu costs.
B)  go to the bank more often.This is known as shoeleather costs.
C)  go to the bank less often.This is known as the inflation fallacy.
D)  go to the bank less often.This is known as redistribution costs.E) All of the above
F) C) and D)

Question 8

Interest rates for savings accounts listed on your bank's website

Accepted Answer

A)  and a price index are real variables.
B)  and a price index are nominal variables.
C)  are real variable and a price index is a nominal variable.
D)  are nominal variables, and price index is a real variableE) A) and B)
F) B) and C)

Question 9

The real interest rate is 8 percent and the nominal interest rate is 12 percent.Is there inflation or deflation? What is the inflation or deflation rate?

Accepted Answer

A)  deflation; 1.5 percent
B)  deflation; 4 percent
C)  inflation; 1.5 percent
D)  inflation; 4 percentE) A) and B)
F) B) and C)

Question 10

Which of the following is correct?

Accepted Answer

A)  If the Fed purchases bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
B)  If the Fed sells bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
C)  If the Fed purchases bonds, then the money supply curve shifts right.An increase in the price level shifts the money supply curve right.
D)  If the Fed sells bonds, then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right.E) A) and B)
F) A) and C)

Question 11

Inflation can be measured by the

Accepted Answer

A)  change in the consumer price index.
B)  percentage change in the consumer price index.
C)  percentage change in the price of a specific commodity.
D)  change in the price of a specific commodity.E) None of the above
F) C) and D)

Question 12

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 13

Use the figure below for the following questions.
Figure 30-1
 
-Refer to Figure 30-1.If the current money supply is located at MS₁,

Accepted Answer

A)  there is no excess supply or excess demand if the value of money is 2.
B)  the equilibrium is at point C.
C)  there is an excess supply of money if the value of money is 1.
D)  None of the above is correct.E) B) and C)
F) C) and D)

Question 14

Suppose that monetary neutrality holds.Of the following variables,which ones do not change when the money supply increases?
a.real interest rates
b.inflation
c.the price level
d.real output
e.real wages
f.nominal wages

Accepted Answer

The answer of Suppose that monetary neutrality holds.Of the following...

Question 15

If V and M are constant,and Y doubles,the quantity equation implies that the price level

Accepted Answer

A)  falls to half its original level.
B)  does not change.
C)  doubles.
D)  more than doubles.E) A) and D)
F) B) and C)

Question 16

The classical theory of inflation

Accepted Answer

A)  is also known as the quantity theory of money.
B)  was developed by some of the earliest economic thinkers.
C)  is used by most modern economists to explain the long-run determinants of the inflation rate.
D)  All of the above are correct.E) B) and C)
F) A) and B)

Question 17

Sally sells 40 bags of lettuce for a total of $80 at the farmers' market.

Accepted Answer

A)  The $80 is a real variable.The quantity of lettuce is a nominal variable.
B)  The $80 is a nominal variable.The quantity of lettuce is a real variable.
C)  Both the $80 and the quantity of lettuce are nominal variables.
D)  Both the $80 and the quantity of lettuce are real variables.E) A) and D)
F) A) and C)

Question 18

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 19

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

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 D)
F) B) and C)

Question 20

If Y and M are constant,and V doubles,the quantity equation implies that the price level

Accepted Answer

A)  falls to half it's original level.
B)  doubles.
C)  more than doubles.
D)  does not change.E) A) and D)
F) C) and D)

Exam 30: Money Growth and Inflation

Based on the quantity equation,if M = 100,V = 3,and Y = 200,then P =

Correct AnswerverifiedShow Answer

When the money supply and the price level in countries that experienced hyperinflation are plotted against time,we see that

Correct AnswerverifiedShow Answer

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Correct AnswerverifiedRelative prices are the value of one goo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that monetary neutrality holds.Of the following variables,which ones do not change when the money supply increases? a.real interest rates b.inflation c.the price level d.real output e.real wages f.nominal wages

Correct AnswerverifiedShow Answer

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.If the current money supply is located at MS₁,

Correct AnswerverifiedShow Answer

If Y and M are constant,and V doubles,the quantity equation implies that the price level

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Correct AnswerverifiedShow Answer

If V and M are constant,and Y doubles,the quantity equation implies that the price level

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As inflation rises,people will tend to

Correct AnswerverifiedShow Answer

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Correct AnswerverifiedShow Answer

The real interest rate is 8 percent and the nominal interest rate is 12 percent.Is there inflation or deflation? What is the inflation or deflation rate?

Correct AnswerverifiedShow Answer

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

Interest rates for savings accounts listed on your bank's website

Correct AnswerverifiedShow Answer

The classical theory of inflation

Correct AnswerverifiedShow Answer

Sally sells 40 bags of lettuce for a total of $80 at the farmers' market.

Correct AnswerverifiedShow Answer

The quantity theory of money can explain hyperinflations but not moderate inflation.

Correct AnswerverifiedShow Answer

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Relative prices are the value of one goo...
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