Question 1

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) B) and C)
F) All of the above

Question 2

Which of the following is correct? Inflation

Accepted Answer

A)   impedes financial markets in their role of allocating resources.
B)   reduces the purchasing power of the average consumer.
C)   generally increases after-tax real interest rates.
D)   is most costly when anticipated.E) A) and B)
F) None of the above

Question 3

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) B) and C)

Question 4

The term hyperinflation refers to

Accepted Answer

A)   the spread of inflation from one country to others.
B)   a decrease in the inflation rate.
C)   a period of very high inflation.
D)   inflation accompanied by a recession.E) A) and D)
F) A) and C)

Question 5

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) B) and D)
F) None of the above

Question 6

List and define any two of the costs of high inflation.

Accepted Answer

The costs include:
Shoeleather costs: th...

Question 7

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) B) and C)
F) A) and D)

Question 8

Suppose the nominal interest rate is 5 percent;the tax rate on interest income is 30 percent,and the after-tax real interest rate is 0.8 percent.Then the inflation rate is 2.7 percent.

Accepted Answer

A) True 
 B)False

Question 9

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1,then A)  when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services. B)  when the money market is in equilibrium,one unit of goods and services sells for 2 dollars. C)  there is an excess demand for money if the value of money in terms of goods and services is 0.375. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

Accepted Answer

A)   when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services.
B)   when the money market is in equilibrium,one unit of goods and services sells for 2 dollars.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.375.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 10

If velocity and output were nearly constant,then

Accepted Answer

A)   the inflation rate would be much higher than the money supply growth rate.
B)   the inflation rate would be about the same as the money supply growth rate.
C)   the inflation rate would be much lower than the money supply growth rate.
D)   any of the above would be possible.E) B) and C)
F) A) and C)

Question 11

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

Accepted Answer

A)   the price level and nominal wages
B)   the price level,but not the nominal wage
C)   the nominal wage,but not the price level
D)   neither the nominal wage nor the price levelE) A) and C)
F) None of the above

Question 12

If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?

Accepted Answer

A)   lenders and people holding a lot of currency
B)   lenders but not people holding a lot of currency
C)   people holding a lot of currency but not lenders
D)   neither lenders nor people holding a lot of currencyE) C) and D)
F) A) and B)

Question 13

When deciding how much to save,people care most about

Accepted Answer

A)   after-tax nominal interest rates.
B)   after-tax real interest rates.
C)   before-tax real interest rates.
D)   before-tax nominal interest rates.E) A) and B)
F) All of the above

Question 14

Money demand refers to

Accepted Answer

A)   the total quantity of financial assets that people want to hold.
B)   how much income people want to earn per year.
C)   how much wealth people want to hold in liquid form.
D)   how much currency the Federal Reserve decides to print.E) B) and D)
F) A) and D)

Question 15

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 16

When the money market is drawn with the value of money on the vertical axis,the price level decreases if

Accepted Answer

A)   either money demand or money supply shifts right.
B)   either money demand or money supply shifts left.
C)   money demand shifts right or money supply shifts left.
D)   money demand shifts left or money supply shifts right.E) All of the above
F) C) and D)

Question 17

According to the quantity theory of money,a 2 percent increase in the money supply

Accepted Answer

A)   causes the price level to fall by 2 percent.
B)   leaves the price level unchanged.
C)   causes the price level to rise by less than 2 percent.
D)   causes the price level to rise by 2 percent.E) A) and C)
F) B) and D)

Question 18

Figure 30-1 1 to MS2, A)  the equilibrium value of money decreases. B)  the equilibrium price level decreases. C)  the supply of money has decreased. D)  the demand for goods and services will decrease." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)   the equilibrium value of money decreases.
B)   the equilibrium price level decreases.
C)   the supply of money has decreased.
D)   the demand for goods and services will decrease.E) All of the above
F) A) and B)

Question 19

Economic variables whose values are measured in goods are called

Accepted Answer

A)   dichotomous variables.
B)   nominal variables.
C)   classical variables.
D)   real variables.E) A) and B)
F) A) and C)

Question 20

The costs of changing price tags and price listings are known as

Accepted Answer

A)   inflation-induced tax distortions.
B)   relative-price variability costs.
C)   shoeleather costs.
D)   menu costs.E) A) and C)
F) A) and D)

Exam 30: Money Growth and Inflation

The term hyperinflation refers to

Correct AnswerverifiedShow Answer

According to the quantity theory of money,a 2 percent increase in the money supply

Correct AnswerverifiedShow Answer

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,the price level decreases if

Correct AnswerverifiedShow 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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

List and define any two of the costs of high inflation.

Correct AnswerverifiedThe costs include:Shoeleather costs: th...View AnswerShow Answer

Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

Correct AnswerverifiedShow Answer

Money demand refers to

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in goods are called

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct? Inflation

Correct AnswerverifiedShow Answer

If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?

Correct AnswerverifiedShow Answer

If velocity and output were nearly constant,then

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate is 5 percent;the tax rate on interest income is 30 percent,and the after-tax real interest rate is 0.8 percent.Then the inflation rate is 2.7 percent.

Correct AnswerverifiedShow Answer

The costs of changing price tags and price listings are known as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When deciding how much to save,people care most about

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

Correct Answer
verified

Correct Answer
verified

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD₁,then

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The costs include:
Shoeleather costs: th...
View Answer

Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

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

Correct Answer
verified

Correct Answer
verified