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An increase in money demand would create a surplus of money at the original value of money.

A) True
B) False

Correct Answer

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The story The Wizard of Oz can be interpreted as an allegory about U.S.monetary policy in the late 19th century.

A) True
B) False

Correct Answer

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True

Dollar prices and relative prices are both nominal variables.

A) True
B) False

Correct Answer

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The price level is determined by the supply of,and demand for,money.

A) True
B) False

Correct Answer

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An excess supply of money is eliminated by a falling price level

A) True
B) False

Correct Answer

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verified

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

A) True
B) False

Correct Answer

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verified

If the real interest rate is 5% and the inflation rate is 3%,then the nominal interest rate is 8%.

A) True
B) False

Correct Answer

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Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

A) True
B) False

Correct Answer

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

A) True
B) False

Correct Answer

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False

According to the Fisher effect,if inflation rises then the nominal interest rate rises.

A) True
B) False

Correct Answer

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Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

A) True
B) False

Correct Answer

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Inflation is costly only if it is unanticipated.

A) True
B) False

Correct Answer

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The source of all four classic hyperinflations was high rates of money growth.

A) True
B) False

Correct Answer

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True

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 2.1percent.Then the inflation rate is 2 percent.

A) True
B) False

Correct Answer

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If the Fed conducts open market sales,the equilibrium value of money decreases and the equilibrium price level increases.

A) True
B) False

Correct Answer

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Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

A) True
B) False

Correct Answer

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verified

As the price level falls,the value of money falls.

A) True
B) False

Correct Answer

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If inflation is higher than expected,then lenders receive interest payments whose real values are less than they expected.

A) True
B) False

Correct Answer

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For a given real interest rate,an increase in the inflation rate reduces the after-tax real interest rate.

A) True
B) False

Correct Answer

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The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.

A) True
B) False

Correct Answer

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