Question 1

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Accepted Answer

A)   two percent and prices fell one percent.
B)   two percent and prices rose one percent.
C)   three percent and prices rose one percent.
D)   three percent and prices fell one percent.E) All of the above
F) A) and B)

Question 2

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Accepted Answer

A)   higher than she had expected, and the real value of the loan is higher than she had expected.
B)   higher than she had expected, and the real value of the loan is lower than she had expected.
C)   lower than she had expected, and the real value of the loan is higher than she had expected.
D)   lower then she had expected, and the real value of the loan is lower than she had expected.E) A) and B)
F) B) and C)

Question 3

Open-market purchases by the Fed make the money supply

Accepted Answer

A)   increase, which makes the value of money increase.
B)   increase, which makes the value of money decrease.
C)   decrease, which makes the value of money decrease.
D)   decrease, which makes the value of money increase.E) All of the above
F) A) and B)

Question 4

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

Accepted Answer

A)   the price level and nominal GDP
B)   the price level and real GDP
C)   only real GDP
D)   only the price levelE) A) and B)
F) None of the above

Question 5

If there is inflation, then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)   high relative price. Relative-price variability rises as the inflation rate rises.
B)   high relative price. Relative-price variability falls as the inflation rate rises.
C)   low relative price. Relative-price variability rises as the inflation rate rises.
D)   low relative price. Relative-price variability falls as the inflation rate rises.E) A) and C)
F) A) and D)

Question 6

Which of the following is correct?

Accepted Answer

A)   A period of hyperinflation is a period of extraordinarily low inflation.
B)   A period of deflation is any period during which the inflation rate is decreasing.
C)   From 2002 to 2012, U.S. inflation averaged about 2.5 percent per year.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 7

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Accepted Answer

A)   velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P.
B)   velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P.
C)   velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P.
D)   velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P.E) A) and B)
F) A) and C)

Question 8

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) All of the above
F) None of the above

Question 9

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. 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, but no real gain, and you paid taxes on the nominal gain.
D)   a nominal gain, but no real gain, and you paid no taxes on the transaction.E) None of the above
F) All of the above

Question 10

The costs a business incurs to change its prices are called .

Accepted Answer

The answer of The costs a business incurs to change...

Question 11

According to the Fisher effect, if inflation rises then the nominal interest rate rises.

Accepted Answer

A) True 
 B)False

Question 12

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 D)
F) C) and D)

Question 13

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

Accepted Answer

rise, exce...

Question 14

In which of the following cases is the after-tax real interest rate highest?

Accepted Answer

A)   inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%.
B)   inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 25%.
C)   inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 20%.
D)   inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 25%.E) A) and B)
F) A) and D)

Question 15

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

A)   unemployment
B)   the price level
C)   nominal interest rates
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 16

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

Question 17

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Accepted Answer

An increase in inflation reduc...

Question 18

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

Accepted Answer

A)   right, lowering the price level.
B)   right, raising the price level.
C)   left, raising the price level.
D)   left, lowering the price level.E) None of the above
F) B) and C)

Question 19

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

Question 20

As the price level falls, the value of money falls.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

If there is inflation, then a firm that has kept its price fixed for some time will have a

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

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Correct AnswerverifiedAn increase in inflation reduc...View AnswerShow Answer

Open-market purchases by the Fed make the money supply

Correct AnswerverifiedShow Answer

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

Correct Answerverifiedrise, exce...View AnswerShow Answer

As the price level falls, the value of money falls.

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According to the classical dichotomy, which of the following is not influenced by monetary factors?

Correct AnswerverifiedShow Answer

Which of the following is an example of menu costs?

Correct AnswerverifiedShow Answer

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Correct AnswerverifiedShow Answer

The costs a business incurs to change its prices are called .

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Correct AnswerverifiedShow Answer

According to the Fisher effect, if inflation rises then the nominal interest rate rises.

Correct AnswerverifiedShow Answer

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Correct AnswerverifiedShow Answer

When inflation rises, the nominal interest rate

Correct AnswerverifiedShow Answer

If inflation is lower than what was expected,

Correct AnswerverifiedShow Answer

In which of the following cases is the after-tax real interest rate highest?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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An increase in inflation reduc...
View Answer

Correct Answer
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In the long run an increase in the money supply causes the price level to . The price level moves in this direction because an increase in the money supply creates in the money market that causes people to spending.

Correct Answer
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rise, exce...
View Answer

Correct Answer
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