Question 1

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) A) and D)
F) All of the above

Question 2

The source of hyperinflations is primarily

Accepted Answer

A)   lower output growth.
B)   continuing declines in velocity.
C)   increases in money-supply growth.
D)   continuing increases in money demand.E) All of the above
F) None of the above

Question 3

According to the assumptions of the quantity theory of money,if the money supply increases by 5 percent,then

Accepted Answer

A)   nominal and real GDP would rise by 5 percent.
B)   nominal GDP would rise by 5 percent;real GDP would be unchanged.
C)   nominal GDP would be unchanged;real GDP would rise by 5 percent.
D)   neither nominal GDP nor real GDP would change.E) B) and C)
F) A) and D)

Question 4

As the price level decreases,the value of money

Accepted Answer

A)   increases,so people want to hold more of it.
B)   increases,so people want to hold less of it.
C)   decreases,so people want to hold more of it.
D)   decreases,so people want to hold less of it.E) A) and D)
F) C) and D)

Question 5

Wealth is redistributed from debtors to creditors when inflation was expected to be

Accepted Answer

A)   high and it turns out to be high.
B)   low and it turns out to be low.
C)   low and it turns out to be high.
D)   high and it turns out to be low.E) All of the above
F) B) and C)

Question 6

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

Question 7

In the U.S. ,from the early 1980s through the early 1990s,

Accepted Answer

A)   both inflation and nominal interest rates rose.
B)   both inflation and nominal interest rates fell.
C)   the inflation rate fell and the nominal interest rate rose.
D)   the inflation rate rose and the nominal interest rate fell.E) None of the above
F) C) and D)

Question 8

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A)   is 1.5 times its old value.
B)   is 3 times its old value.
C)   is 6 times its old value.
D)   is the same as its old value.E) A) and C)
F) None of the above

Question 9

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically,the government in countries th...

Question 10

Figure 30-1 1,then 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." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1.If the current money supply is MS1,then

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

Question 11

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Accepted Answer

A)   The nominal interest rate was 11 percent and the inflation rate was 5 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 5 percent.
C)   The nominal interest rate was 5 percent and the inflation rate was -1 percent.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 12

Which of the following is accurate?

Accepted Answer

A)   Monetary policy is neutral in both the short run and the long run.
B)   Though monetary policy is neutral in the long run,it may have effects on real variables in the short run.
C)   Monetary policy has profound effects on real variables in both the short run and the long run.
D)   Monetary policy has profound effects on real variables in the long run,but is neutral in the short run.E) A) and B)
F) A) and C)

Question 13

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)   3.4 percent
B)   1.6 percent
C)   1.0 percent
D)   None of the above is correct.E) A) and D)
F) None of the above

Question 14

On its Website,your bank posts the interest rates it is paying on savings accounts.Those posted rates

Accepted Answer

A)   and a price index are both real variables.
B)   and a price index are both nominal variables.
C)   are real variables,and a price index is a nominal variable.
D)   are nominal variables,and a price index is a real variableE) All of the above
F) B) and D)

Question 15

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 16

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

Accepted Answer

A)   and equilibrium quantity of money to increase.
B)   and equilibrium quantity of money to decrease.
C)   to increase,while the equilibrium quantity of money decreases.
D)   to decrease,while the equilibrium quantity of money increases.E) B) and C)
F) All of the above

Question 17

If inflation is higher 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) A) and D)
F) All of the above

Question 18

Printing money to finance government expenditures

Accepted Answer

A)   causes the value of money to rise.
B)   imposes a tax on everyone who holds money.
C)   is the principal method by which the U.S.government finances its expenditures.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 19

Most economists believe the principle of monetary neutrality is

Accepted Answer

A)   relevant to both the short and long run.
B)   irrelevant to both the short and long run.
C)   mostly relevant to the short run.
D)   mostly relevant to the long run.E) C) and D)
F) None of the above

Question 20

You put money into an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)   1.2 percent
B)   2.8 percent
C)   4.8 percent
D)   None of the above is correct.E) A) and D)
F) All of the above

Exam 30: Money Growth and Inflation

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

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Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

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Which of the following is accurate?

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Wealth is redistributed from debtors to creditors when inflation was expected to be

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

Correct AnswerverifiedShow Answer

On its Website,your bank posts the interest rates it is paying on savings accounts.Those posted rates

Correct AnswerverifiedShow Answer

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

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Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Correct AnswerverifiedTypically,the government in countries th...View AnswerShow Answer

Printing money to finance government expenditures

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If inflation is higher than what was expected,

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According to the assumptions of the quantity theory of money,if the money supply increases by 5 percent,then

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

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Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

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

The source of hyperinflations is primarily

Correct AnswerverifiedShow Answer

You put money into an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Correct AnswerverifiedShow Answer

Most economists believe the principle of monetary neutrality is

Correct AnswerverifiedShow Answer

In the U.S. ,from the early 1980s through the early 1990s,

Correct AnswerverifiedShow Answer

As the price level decreases,the value of money

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Typically,the government in countries th...
View Answer

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

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