Question 1

According to the classical dichotomy, which of the following is affected by monetary factors?

Accepted Answer

A)   nominal wages
B)   the price level
C)   nominal GDP
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 2

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

Accepted Answer

A)   the price level and the value of money rise.
B)   the price level rises and the value of money falls.
C)   the price level falls and the value of money rises.
D)   the price level and the value of money fall.E) C) and D)
F) All of the above

Question 3

Inflation can be measured by the

Accepted Answer

A)   change in the consumer price index. Inflation in the U.S. has averaged about 2.5% over the last 80 years.
B)   change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.
C)   percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.
D)   percentage change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.E) B) and C)
F) All of the above

Question 4

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

Accepted Answer

A)   135
B)   132
C)   125
D)   121E) None of the above
F) A) and C)

Question 5

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 6

You find that to attract a sufficient number of workers you have to pay them more dollars. Given the price of your output you determine you are paying your workers more in goods than before. Which of the following has risen?

Accepted Answer

A)   The real and nominal value of the wages you pay.
B)   The real but not the nominal value of wages you pay.
C)   The nominal but not the real value of the wages you pay.
D)   Neither the real nor the nominal value of the wages you pay.E) A) and C)
F) A) and D)

Question 7

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply

Accepted Answer

A)   increases the price level and increases the value of money.
B)   increases the price level and decreases the value of money.
C)   decreases the price level and increases the value of money.
D)   decreases the price level and decreases the value of money.E) B) and D)
F) B) and C)

Question 8

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) All of the above
F) None of the above

Question 9

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Accepted Answer

Relative prices are the value of one goo...

Question 10

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 11

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Accepted Answer

increases, a movemen...

Question 12

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

Accepted Answer

A)   Friedman Effect.
B)   Hume Effect.
C)   Fisher Effect.
D)   the inflation tax.E) B) and C)
F) All of the above

Question 13

If inflation is lower than what was expected,

Accepted Answer

A)   creditors receive a lower real interest rate than they had anticipated.
B)   creditors pay a lower real interest rate than they had anticipated.
C)   debtors receive a higher real interest rate than they had anticipated.
D)   debtors pay a higher real interest rate than they had anticipated.E) A) and B)
F) B) and C)

Question 14

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Accepted Answer

The answer of Money neutrality states that a change in...

Question 15

The inflation rate is measured as the percentage change in a price index.

Accepted Answer

A) True 
 B)False

Question 16

Between 1880 and 1896 the average level of prices in the U.S. economy

Accepted Answer

A)   fell 23 percent.
B)   fell 4 percent.
C)   rose 23 percent.
D)   rose 50 percent.E) None of the above
F) B) and D)

Question 17

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

Accepted Answer

The Fisher effect says that increases in...

Question 18

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Accepted Answer

A)   the price level will rise.
B)   the value of money will rise.
C)   money demand will shift leftward.
D)   money demand will shift rightward.E) A) and B)
F) B) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Accepted Answer

A)   The number of dollars you receive increases and the purchasing power of the dollars you receive increases.
B)   The number of dollars you receive increases and the purchasing power of the dollars you receive decreases.
C)   The number of dollars you receive decreases and the purchasing power of the dollars you receive increases.
D)   The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.E) All of the above
F) None of the above

Exam 17: Money Growth and Inflation

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply

Correct AnswerverifiedShow Answer

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Between 1880 and 1896 the average level of prices in the U.S. economy

Correct AnswerverifiedShow Answer

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Correct AnswerverifiedShow Answer

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

Correct AnswerverifiedShow Answer

The inflation rate is measured as the percentage change in a price index.

Correct AnswerverifiedShow Answer

If inflation is lower than what was expected,

Correct AnswerverifiedShow Answer

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Correct AnswerverifiedShow Answer

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Correct AnswerverifiedRelative prices are the value of one goo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is affected by monetary factors?

Correct AnswerverifiedShow Answer

You find that to attract a sufficient number of workers you have to pay them more dollars. Given the price of your output you determine you are paying your workers more in goods than before. Which of the following has risen?

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Correct Answerverifiedincreases, a movemen...View AnswerShow Answer

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

Correct AnswerverifiedThe Fisher effect says that increases in...View AnswerShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

Money neutrality states that a change in the money supply affects _ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _.

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It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

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Relative prices are the value of one goo...
View Answer

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A decrease in the value of money the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

Correct Answer
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increases, a movemen...
View Answer

Correct Answer
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The Fisher effect says that increases in...
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Correct Answer
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