Question 1

Which of the following is correct?

Accepted Answer

A)   The Continental Congress used the inflation tax to help finance the American Revolution.
B)   The inflation is today a principal source of revenue for the U.S. government.
C)   There is no way a person can avoid the inflation tax.
D)   Governments can only raise revenues through taxation.E) All of the above
F) B) and D)

Question 2

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 3

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately

Accepted Answer

A)   3.0
B)   6.0
C)   9.0
D)   1.5E) A) and B)
F) B) and C)

Question 4

The price level rises if either

Accepted Answer

A)   money demand or money supply shifts rightward.
B)   money demand shifts rightward or money supply shifts leftward.
C)   money demand shifts leftward or money supply shifts rightward.
D)   money demand or money supply shifts leftward.E) None of the above
F) A) and C)

Question 5

Between 1880 and 1886, prices that were

Accepted Answer

A)   lower than expected transferred wealth from creditors to debtors.
B)   lower than expected transferred wealth from debtors to creditors.
C)   higher than expected transferred wealth from creditors to debtors.
D)   higher than expected transferred wealth from debtors to creditors.E) A) and B)
F) A) and C)

Question 6

Velocity is computed as the

Accepted Answer

A)   price level times real GDP divided by the money supply.
B)   price level times the money supply divided by real GDP.
C)   real GDP times the money supply divided by the price level.
D)   real GDP times the money supply divided by the rate at which money changes hands.E) A) and B)
F) A) and C)

Question 7

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Accepted Answer

A)   decrease that benefited creditors at the expense of debtors.
B)   decrease that benefited debtors at the expense of creditors.
C)   increase that benefited creditors at the expense of debtors.
D)   increase that benefited debtors at the expense of creditors.E) C) and D)
F) A) and D)

Question 8

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Accepted Answer

A)   8.
B)   0.5.
C)   2.
D)   3.E) A) and D)
F) C) and D)

Question 9

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

Accepted Answer

A)   both interest income and capital gains.
B)   interest income but not capital gains.
C)   capital gains but not interest income.
D)   neither interest income nor capital gains.E) All of the above
F) A) and C)

Question 10

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Accepted Answer

rapid money supply g...

Question 11

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Accepted Answer

A)   both interest income and capital gains.
B)   interest income but not capital gains.
C)   capital gains but not interest income.
D)   neither interest income nor capital gains.E) C) and D)
F) All of the above

Question 12

When the money market is drawn with the value of money on the vertical axis, as the price level increases the quantity of money

Accepted Answer

A)   demanded increases.
B)   demanded decreases.
C)   supplied increases.
D)   supplied decreases.E) A) and C)
F) None of the above

Question 13

An increase in the price level causes the value of money to _____. Therefore, people will want to hold ____ money, because the cost of their purchases has increased.

Accepted Answer

The answer of An increase in the price level causes...

Question 14

With the value of money on the vertical axis, the money supply curve is

Accepted Answer

A)   upward-sloping.
B)   downward-sloping.
C)   horizontal.
D)   vertical.E) C) and D)
F) All of the above

Question 15

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Accepted Answer

A) True 
 B)False

Question 16

If the number of dollars needed to buy a representative basket of goods falls, the price level

Accepted Answer

A)   falls, so the value of money falls.
B)   falls, so the value of money rises.
C)   rises, so the value of money falls.
D)   rises, so the value of money rises.E) A) and C)
F) B) and C)

Question 17

The classical dichotomy argues that changes in the money supply

Accepted Answer

A)   affect both nominal and real variables.
B)   affect neither nominal nor real variables.
C)   affect nominal variables, but not real variables.
D)   do not affect nominal variables, but do affect real variables.E) B) and D)
F) A) and D)

Question 18

Steve purchases some land for $30,000. He maintains it, but makes no improvements to it. One year later he sells it for $32,000. Stephanie puts $30,000 in a savings account that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the 35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain and who had the higher after-tax real gain?

Accepted Answer

A)   Steve had both the higher before-tax real gain and the higher after-tax real gain.
B)   Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain.
C)   Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain.
D)   Stephanie had both the higher before-tax real gain and the higher after-tax real gain.E) C) and D)
F) B) and C)

Question 19

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

Question 20

When there is inflation, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)   increases, and so the value of money rises.
B)   increases, and so the value of money falls.
C)   decreases, and so the value of money rises.
D)   decreases, and so the value of money fallsE) A) and B)
F) A) and C)

Exam 22: Money Growth and Inflation

With the value of money on the vertical axis, the money supply curve is

Correct Answer
verified

Correct Answer
verified

An increase in the price level causes the value of money to _. Therefore, people will want to hold money, because the cost of their purchases has increased.

Correct Answer
verified

If the number of dollars needed to buy a representative basket of goods falls, the price level

Correct Answer
verified

In the long run inflation is explained by . For countries that had hyperinflation this source of inflation arose primarily because the government .

Correct Answer
verified
rapid money supply g...
View Answer

When the money market is drawn with the value of money on the vertical axis, as the price level increases the quantity of money

Correct Answer
verified

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

Correct Answer
verified

Correct Answer
verified

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Correct Answer
verified

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 Answer
verified

Which of the following is correct?

Correct Answer
verified

Velocity is computed as the

Correct Answer
verified

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Correct Answer
verified

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Correct Answer
verified

The price level rises if either

Correct Answer
verified

When there is inflation, the number of dollars needed to buy a representative basket of goods

Correct Answer
verified

Between 1880 and 1886, prices that were

Correct Answer
verified

The classical dichotomy argues that changes in the money supply

Correct Answer
verified

Inflation can be measured by the

Correct Answer
verified

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Correct Answer
verified

Exam 22: Money Growth and Inflation

With the value of money on the vertical axis, the money supply curve is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the price level causes the value of money to _____. Therefore, people will want to hold ____ money, because the cost of their purchases has increased.

Correct AnswerverifiedShow Answer

If the number of dollars needed to buy a representative basket of goods falls, the price level

Correct AnswerverifiedShow Answer

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Correct Answerverifiedrapid money supply g...View AnswerShow Answer

When the money market is drawn with the value of money on the vertical axis, as the price level increases the quantity of money

Correct AnswerverifiedShow Answer

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

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

Velocity is computed as the

Correct AnswerverifiedShow Answer

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Correct AnswerverifiedShow Answer

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Correct AnswerverifiedShow Answer

The price level rises if either

Correct AnswerverifiedShow Answer

When there is inflation, the number of dollars needed to buy a representative basket of goods

Correct AnswerverifiedShow Answer

Between 1880 and 1886, prices that were

Correct AnswerverifiedShow Answer

The classical dichotomy argues that changes in the money supply

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

An increase in the price level causes the value of money to _. Therefore, people will want to hold money, because the cost of their purchases has increased.

Correct Answer
verified

Correct Answer
verified

In the long run inflation is explained by . For countries that had hyperinflation this source of inflation arose primarily because the government .

Correct Answer
verified
rapid money supply g...
View 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