Question 1

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

Accepted Answer

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

Question 2

In the long run, money demand and money supply determine

Accepted Answer

A)   the value of money and the real interest rate.
B)   the value of money but not the real interest rate.
C)   the real interest rate but not the value of money.
D)   neither the value of money nor the real interest rate.E) B) and C)
F) All of the above

Question 3

When inflation rises, the nominal interest rate

Accepted Answer

A)   rises, and people desire to hold more money.
B)   rises, and people desire to hold less money.
C)   falls, and people desire to hold more money.
D)   falls, and people desire to hold less moneyE) None of the above
F) A) and B)

Question 4

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Accepted Answer

A)   Y rose, V rose
B)   Y fell, V fell
C)   Y rose, V fell
D)   Y fell, V roseE) A) and C)
F) A) and D)

Question 5

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Accepted Answer

A)   real output only.
B)   nominal output only.
C)   the price level only.
D)   both the price level and nominal output.E) B) and D)
F) A) and B)

Question 6

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to

Accepted Answer

A)   2,500.
B)   7,500.
C)   10,000.
D)   40,000.E) A) and B)
F) None of the above

Question 7

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Accepted Answer

A)   inflation averaged 8% per year and the real rate of return was 9%.
B)   inflation averaged 11% per year and the real rate of return was 17%.
C)   inflation averaged 5% per year and the real rate of return was 4%.
D)   inflation averaged 1% per year and the real rate of return was 6%.E) A) and B)
F) A) and C)

Question 8

Which of the following is correct?

Accepted Answer

A)   If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
B)   If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
C)   If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right.
D)   If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.E) A) and C)
F) A) and B)

Question 9

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

Accepted Answer

A)   6
B)   1.5
C)   0.67
D)   0.167E) None of the above
F) A) and B)

Question 10

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

Accepted Answer

A)   The price level and velocity are both 8.
B)   The price level is 2 and velocity is 8.
C)   The price level and velocity are both 4.
D)   The price level is 4 and velocity is 8.E) A) and B)
F) A) and C)

Question 11

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

Accepted Answer

A)   nominal and real GDP would fall by 7 percent.
B)   nominal GDP would fall by 7 percent; real GDP would be unchanged.
C)   nominal GDP would be unchanged; real GDP would fall by 7 percent.
D)   neither nominal GDP nor real GDP would change.E) B) and C)
F) B) and D)

Question 12

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Accepted Answer

A)   M = $500, V = 4.
B)   M = $250, V = 8.
C)   M = $1,000, V = 2.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 13

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

Question 14

If inflation is less than expected, who is wealth redistributed to?

Accepted Answer

The answer of If inflation is less than expected, who...

Question 15

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

Accepted Answer

debtors/bo...

Question 16

When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through an) _____ in the price level.

Accepted Answer

The answer of When the Federal Reserve injects money into...

Question 17

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Accepted Answer

A)   The $80 is a real variable. The quantity of shoes is a nominal variable.
B)   The $80 is a nominal variable. The quantity of shoes is a real variable.
C)   Both the $80 and the quantity of shoes are nominal variables.
D)   Both the $80 and the quantity of shoes are real variables.E) None of the above
F) B) and C)

Question 18

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Accepted Answer

A)   1.
B)   1.5.
C)   2.
D)   4.5.E) A) and C)
F) All of the above

Question 19

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Accepted Answer

The after- tax nominal interes...

Question 20

Which of the following is an example of menu costs?

Accepted Answer

A)   deciding on new prices
B)   printing new price lists
C)   advertising new prices
D)   All of the above are examples of menu costs.E) A) and D)
F) B) and C)

Exam 17: Money Growth and Inflation

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Correct Answer
verified

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Correct Answer
verified

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _ to _.

Correct Answer
verified
debtors/bo...
View Answer

When inflation rises, the nominal interest rate

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Correct Answer
verified

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Correct Answer
verified

Which of the following is an example of menu costs?

Correct Answer
verified

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

Correct Answer
verified

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Correct Answer
verified

If inflation is less than expected, who is wealth redistributed to?

Correct Answer
verified

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

Correct Answer
verified

In the long run, money demand and money supply determine

Correct Answer
verified

When the Federal Reserve injects money into the banking system, it initially causes an excess _ of money. Equilibrium in the money market is reestablished through an) _ in the price level.

Correct Answer
verified

Correct Answer
verified

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Correct Answer
verified

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Correct Answer
verified
The after- tax nominal interes...
View Answer

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

Correct Answer
verified

Exam 17: Money Growth and Inflation

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Correct AnswerverifiedShow Answer

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Correct AnswerverifiedShow Answer

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

Correct Answerverifieddebtors/bo...View AnswerShow Answer

When inflation rises, the nominal interest rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Correct AnswerverifiedShow Answer

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Correct AnswerverifiedShow Answer

Which of the following is an example of menu costs?

Correct AnswerverifiedShow Answer

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

Correct AnswerverifiedShow Answer

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Correct AnswerverifiedShow Answer

If inflation is less than expected, who is wealth redistributed to?

Correct AnswerverifiedShow Answer

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

Correct AnswerverifiedShow Answer

In the long run, money demand and money supply determine

Correct AnswerverifiedShow Answer

When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through an) _____ in the price level.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Correct AnswerverifiedShow Answer

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Correct AnswerverifiedThe after- tax nominal interes...View AnswerShow Answer

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _ to _.

Correct Answer
verified
debtors/bo...
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

When the Federal Reserve injects money into the banking system, it initially causes an excess _ of money. Equilibrium in the money market is reestablished through an) _ in the price level.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The after- tax nominal interes...
View Answer

Correct Answer
verified