Question 1

The Fisher effect is crucial for understanding changes over time in

Accepted Answer

A)   the nominal interest rate.
B)   the real interest rate.
C)   the inflation rate.
D)   the unemployment rate.E) A) and C)
F) B) and C)

Question 2

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

Question 3

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

Accepted Answer

A)   the real interest rate
B)   real GDP
C)   the real wage
D)   the nominal wage.E) All of the above
F) A) and C)

Question 4

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. If the relevant money-supply curve is the one labeled MS2, then

Accepted Answer

A)   when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.
B)   when the money market is in equilibrium, one unit of goods and services sells for 33 cents.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.5.
D)   All of the above are correct.E) C) and D)
F) A) and D)

Question 5

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Accepted Answer

A) True 
 B)False

Question 6

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Accepted Answer

The inflation tax refers to the fact tha...

Question 7

One benefit of low inflation is that it _____ the variability of relative price changes. Therefore, resources are _____ likely to be better allocated.

Accepted Answer

The answer of One benefit of low inflation is that...

Question 8

Why did farmers in the late 1800s dislike deflation?

Accepted Answer

Most had large nominal debts. ...

Question 9

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Accepted Answer

The answer of You hear an economist state the following:...

Question 10

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) A) and C)
F) None of the above

Question 11

Inflation induces people to spend more resources maintaining lower money holdings. The costs of doing this are called shoeleather costs.

Accepted Answer

A) True 
 B)False

Question 12

Figure 30-1 
-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) A) and C)
F) B) and C)

Question 13

High and unexpected inflation has a greater cost

Accepted Answer

A)   for those who borrow than for those who save.
B)   for those who hold a little money than for those who hold a lot of money.
C)   for those whose wages increase by as much as inflation than for those who are paid a fixed nominal wage.
D)   for savers in high income tax brackets than for savers in low income tax brackets.E) A) and B)
F) A) and C)

Question 14

High and unexpected inflation has a greater cost

Accepted Answer

A)   for those who save than for those who borrow.
B)   for those who hold a little money than for those who hold a lot of money.
C)   for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.
D)   for savers in low income tax brackets than for savers in high income tax brackets.E) C) and D)
F) A) and B)

Question 15

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

Question 16

Identify each of the following as nominal or real variables.
a. the physical output of goods and services
b. the overall price level
c. the dollar price of apples
d. the price of apples relative to the price of oranges
e. the unemployment rate
f. the amount that shows up on your paycheck after taxes
g. the amount of goods you can purchase with the wage you get each hour
h. the taxes that you pay the government

Accepted Answer

a. real variable
b. nominal va...

Question 17

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

Accepted Answer

A)   more than doubles.
B)   changes but less than doubles.
C)   doubles.
D)   does not changeE) B) and D)
F) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Accepted Answer

A)   both a nominal gain and a real gain, and you paid taxes on the nominal gain.
B)   both a nominal gain and a real gain, and you paid taxes only on the real gain.
C)   a nominal gain and a real loss, and you paid taxes on the nominal gain.
D)   a nominal gain and a real loss, and you paid no taxes on the transaction.E) B) and C)
F) A) and C)

Question 20

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Accepted Answer

A)   2,000.
B)   200,000.
C)   12,500.
D)   32,000.E) A) and B)
F) All of the above

Exam 17: Money Growth and Inflation

Inflation induces people to spend more resources maintaining lower money holdings. The costs of doing this are called shoeleather costs.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The Fisher effect is crucial for understanding changes over time in

Correct Answer
verified

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

Correct Answer
verified

Wealth is redistributed from creditors to debtors when inflation is

Correct Answer
verified

One benefit of low inflation is that it _ the variability of relative price changes. Therefore, resources are _ likely to be better allocated.

Correct Answer
verified

High and unexpected inflation has a greater cost

Correct Answer
verified

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct Answer
verified

Why did farmers in the late 1800s dislike deflation?

Correct Answer
verified
Most had large nominal debts. ...
View Answer

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

High and unexpected inflation has a greater cost

Correct Answer
verified

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. If the relevant money-supply curve is the one labeled MS2, then

Correct Answer
verified

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct Answer
verified

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Correct Answer
verified
The inflation tax refers to the fact tha...
View Answer

When deciding how much to save, people care most about

Correct Answer
verified

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

Correct Answer
verified

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Correct Answer
verified

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

Correct Answer
verified

Exam 17: Money Growth and Inflation

Inflation induces people to spend more resources maintaining lower money holdings. The costs of doing this are called shoeleather costs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Fisher effect is crucial for understanding changes over time in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Wealth is redistributed from creditors to debtors when inflation is

Correct AnswerverifiedShow Answer

One benefit of low inflation is that it _____ the variability of relative price changes. Therefore, resources are _____ likely to be better allocated.

Correct AnswerverifiedShow Answer

High and unexpected inflation has a greater cost

Correct AnswerverifiedShow Answer

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct AnswerverifiedShow Answer

Why did farmers in the late 1800s dislike deflation?

Correct AnswerverifiedMost had large nominal debts. ...View AnswerShow Answer

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. real variableb. nominal va...View AnswerShow Answer

High and unexpected inflation has a greater cost

Correct AnswerverifiedShow Answer

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. If the relevant money-supply curve is the one labeled MS2, then

Correct AnswerverifiedShow Answer

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct AnswerverifiedShow Answer

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Correct AnswerverifiedThe inflation tax refers to the fact tha...View AnswerShow Answer

When deciding how much to save, people care most about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

One benefit of low inflation is that it _ the variability of relative price changes. Therefore, resources are _ likely to be better allocated.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Most had large nominal debts. ...
View Answer

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The inflation tax refers to the fact tha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified