Question 1

Monetary neutrality implies that an increase in the quantity of money will

Accepted Answer

A)   increase employment.
B)   increase the price level.
C)   increase the incentive to save.
D)   not increase any of the above.E) B) and C)
F) All of the above

Question 2

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

Question 3

Which of the following is consistent with the idea that high money supply growth leads to high inflation?

Accepted Answer

A)   the quantity theory and evidence from four hyperinflations during the 1920's
B)   the quantity theory but not evidence from four hyperinflations during the 1920's
C)   evidence from four hyperinflations during the 1920's but not the quantity theory
D)   neither the quantity theory nor evidence from four hyperinflation during the 1920'sE) All of the above
F) A) and B)

Question 4

The price of a Honda Accord

Accepted Answer

A)   and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B)   and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C)   is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
D)   is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.E) A) and D)
F) None of the above

Question 5

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

Accepted Answer

A) True 
 B)False

Question 6

Over the past 70 years, prices in the U.S. have risen on average about

Accepted Answer

A)   2 percent per year.
B)   4 percent per year.
C)   6 percent per year.
D)   8 percent per year.E) None of the above
F) B) and C)

Question 7

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A)   the value of money.
B)   real interest rates.
C)   nominal interest rates.
D)   the money supply.E) B) and C)
F) None of the above

Question 8

You put money into an account and earn a real interest rate of 6 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)   4.8 percent
B)   3.2 percent
C)   2.8 percent
D)   None of the above is correct.E) A) and B)
F) A) and D)

Question 9

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the lowest after-tax real rate of interest?

Accepted Answer

A)   Inflation is 4 percent; the tax rate is 5 percent.
B)   Inflation is 3 percent; the tax rate is 20 percent.
C)   Inflation is 2 percent; the tax rate is 30 percent.
D)   The after-tax real interest rate is the same for all of the above.E) B) and D)
F) B) and C)

Question 10

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Accepted Answer

A) True 
 B)False

Question 11

Figure 12-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
 1; also suppose the velocity of money is 3. If the money market is in equilibrium, then the economy's real GDP amounts to A)  5,000. B)  7,500. C)  10,000. D)  15,000. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 12-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 3. If the money market is in equilibrium, then the economy's real GDP amounts to

Accepted Answer

A)   5,000.
B)   7,500.
C)   10,000.
D)   15,000.E) B) and C)
F) A) and B)

Question 12

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Accepted Answer

A)   shifts right, causing the price level to rise.
B)   shifts right, causing the price level to fall.
C)   shifts left, causing the price level to rise.
D)   shifts left, causing the price level to fall.E) None of the above
F) B) and C)

Question 13

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 4,000, Which of the following is 2?

Accepted Answer

A)   the price level and velocity
B)   the price level but not velocity
C)   the price level and velocity.
D)   neither the price level nor velocityE) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)   both the price level and real GDP would rise by 5 percent.
B)   the price level would rise by 5 percent and real GDP would be unchanged.
C)   the price level would be unchanged and real GDP would rise by 5 percent.
D)   both the price level and real GDP would be unchanged.E) B) and C)
F) All of the above

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

Wealth is redistributed from creditors to debtors when inflation is

Accepted Answer

A)   high, whether it is expected or not.
B)   low, whether it is expected or not.
C)   unexpectedly high.
D)   unexpectedly low.E) None of the above
F) A) and B)

Question 18

When the money market is drawn with the value of money on the vertical axis,

Accepted Answer

A)   money demand slopes upward and money supply is horizontal.
B)   money demand slopes downward and money supply is horizontal.
C)   money demand slopes upward and money supply is vertical.
D)   money demand slopes downward and money supply is vertical.E) B) and D)
F) None of the above

Question 19

When prices are falling, economists say that there is

Accepted Answer

A)   disinflation.
B)   deflation.
C)   a contraction.
D)   an inverted inflation.E) None of the above
F) All of the above

Question 20

Monetary neutrality means that a change in the money supply

Accepted Answer

A)   does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run.
B)   does not change real GDP. Most economists think this is a good description of the economy in the long run but not the short run.
C)   does change real GDP. Most economists think this is a good description of the economy in the short-run and the long run.
D)   does change real GDP. Most economists think this is a good description of the economy in the long run but not the short run.E) A) and C)
F) C) and D)

Exam 12: Money Growth and Inflation

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,

Correct Answer
verified

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

Correct Answer
verified

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Correct Answer
verified

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is consistent with the idea that high money supply growth leads to high inflation?

Correct Answer
verified

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the lowest after-tax real rate of interest?

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Correct Answer
verified

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.

Correct Answer
verified

Monetary neutrality means that a change in the money supply

Correct Answer
verified

Over the past 70 years, prices in the U.S. have risen on average about

Correct Answer
verified

You put money into an account and earn a real interest rate of 6 percent. Inflation is 2 percent, and your marginal tax rate is 20 percent. What is your after-tax real rate of interest?

Correct Answer
verified

Wealth is redistributed from creditors to debtors when inflation is

Correct Answer
verified

When prices are falling, economists say that there is

Correct Answer
verified

The price of a Honda Accord

Correct Answer
verified

Monetary neutrality implies that an increase in the quantity of money will

Correct Answer
verified

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 4,000, Which of the following is 2?

Correct Answer
verified

Exam 12: Money Growth and Inflation

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Correct AnswerverifiedShow Answer

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

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

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

Correct AnswerverifiedShow Answer

Which of the following is consistent with the idea that high money supply growth leads to high inflation?

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the lowest after-tax real rate of interest?

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

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 2.1percent. Then the inflation rate is 2 percent.

Correct AnswerverifiedShow Answer

Monetary neutrality means that a change in the money supply

Correct AnswerverifiedShow Answer

Over the past 70 years, prices in the U.S. have risen on average about

Correct AnswerverifiedShow Answer

You put money into an account and earn a real interest rate of 6 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

Wealth is redistributed from creditors to debtors when inflation is

Correct AnswerverifiedShow Answer

When prices are falling, economists say that there is

Correct AnswerverifiedShow Answer

The price of a Honda Accord

Correct AnswerverifiedShow Answer

Monetary neutrality implies that an increase in the quantity of money will

Correct AnswerverifiedShow Answer

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 4,000, Which of the following is 2?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified