Question 1

If the quantity of money demanded is greater than the quantity supplied,then the value of money rises.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that M is fixed.According to the quantity equation,which of the following would make the price level lower?

Accepted Answer

A)   Y or V rise
B)   Y or V fall
C)   Y rises or V falls
D)   Y falls or V risesE) A) and D)
F) A) and C)

Question 3

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,exces...

Question 4

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 5

If the CPI rises,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) B) and C)

Question 6

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A)   the value of money.
B)   real interest rates.
C)   nominal interest rates.
D)   the money supply.E) A) and B)
F) A) and C)

Question 7

According to the principle of monetary neutrality,a decrease in the money supply will not change

Accepted Answer

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

Question 8

In which case is velocity the highest?

Accepted Answer

A)   the price level equals 4,the money supply equals 5,000,and output equals 20,000.
B)   the price level equals 4,the money supply equals 20,000 and output equals 5,000.
C)   the price level equals 2,the money supply equals 5,000,and output equals 20,000.
D)   the price level equals 2,the money supply equals 20,000 and output equals 5,000.E) A) and B)
F) A) and C)

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

Question 10

The country of Lessidinia has a tax system identical to that of the United States.Suppose someone in Lessidinia bought a parcel of land for 20,000 foci (the local currency) in 1960 when the price index equaled 100.In 2002,the person sold the land for 100,000 foci,and the price index equaled 600.The tax rate on nominal gains was 20 percent.Compute the taxes on the nominal gain and the change in the real value of the land in terms of 2002 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)   -60 percent
B)   -30 percent
C)   30 percent
D)   60 percentE) None of the above
F) A) and B)

Question 11

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Accepted Answer

A)   60 percent.
B)   80 percent.
C)   220 percent.
D)   24,000 percent.E) A) and B)
F) None of the above

Question 12

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

Question 13

For a given level of money and real GDP,an increase in velocity would lead to an increase in the price level.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about inflation is correct?

Accepted Answer

A)   Evidence from studies indicates that,in U.S.newspapers,inflation is mentioned less frequently than other economic terms,such as unemployment and productivity.
B)   People believe the inflation fallacy because they tend to believe too strongly in the principle of monetary neutrality.
C)   Nominal incomes are determined by nominal factors;they are not affected by real factors.
D)   Inflation does not in itself reduce people's real purchasing power.E) A) and B)
F) B) and C)

Question 15

Economists agree that

Accepted Answer

A)   neither high inflation nor moderate inflation is very costly.
B)   both high and moderate inflation are quite costly.
C)   high inflation is costly,but they disagree about the costs of moderate inflation.
D)   moderate inflation is as costly as high inflation.E) A) and D)
F) B) and D)

Question 16

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Accepted Answer

A)   11.5 percent
B)   7.5 percent
C)   4.5 percent
D)   2.5 percentE) B) and C)
F) All of the above

Question 17

Which of the following is correct?

Accepted Answer

A)   Inflation impedes financial markets in their role of allocating savings to alternative investments.
B)   Inflation encourages savings through the tax treatment on capital gains.
C)   Inflation encourages larger holdings of currency by the public.
D)   Inflation reduces people's real purchasing power.E) A) and B)
F) A) and C)

Question 18

On a Sunday morning,Tom sold 300 cups of coffee for a total of $750.

Accepted Answer

A)   The $750 is a nominal variable.The 300 cups of coffee is a real variable.
B)   The $750 is a real variable.The 300 cups of coffee is a nominal variable.
C)   Both the $750 and the 300 cups of coffee are nominal variables.
D)   Both the $750 and the 300 cups of coffee are real variables.E) B) and C)
F) All of the above

Question 19

Money demand depends on

Accepted Answer

A)   the price level and the interest rate.
B)   the price level but not the interest rate.
C)   the interest rate but not the price level.
D)   neither the price level nor the interest rate.E) A) and D)
F) All of the above

Question 20

To explain the long-run determinants of the price level and the inflation rate,most economists today rely on the

Accepted Answer

A)   quantity theory of money.
B)   price-index theory of money.
C)   theory of hyperinflation.
D)   disequilibrium theory of money and inflation.E) A) and B)
F) A) and C)

Exam 30: Money Growth and Inflation

On a Sunday morning,Tom sold 300 cups of coffee for a total of $750.

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

According to the principle of monetary neutrality,a decrease in the money supply will not change

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct Answer
verified

If the quantity of money demanded is greater than the quantity supplied,then the value of money rises.

Correct Answer
verified

To explain the long-run determinants of the price level and the inflation rate,most economists today rely on the

Correct Answer
verified

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
verified
rise,exces...
View Answer

For a given level of money and real GDP,an increase in velocity would lead to an increase in the price level.

Correct Answer
verified

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Which of the following statements about inflation is correct?

Correct Answer
verified

Economists agree that

Correct Answer
verified

If the CPI rises,the number of dollars needed to buy a representative basket of goods

Correct Answer
verified

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Correct Answer
verified

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Correct Answer
verified

In which case is velocity the highest?

Correct Answer
verified

Money demand depends on

Correct Answer
verified

Inflation is costly only if it is unanticipated.

Correct Answer
verified

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 Answer
verified

Suppose that M is fixed.According to the quantity equation,which of the following would make the price level lower?

Correct Answer
verified

Exam 30: Money Growth and Inflation

On a Sunday morning,Tom sold 300 cups of coffee for a total of $750.

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

According to the principle of monetary neutrality,a decrease in the money supply will not change

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct AnswerverifiedShow Answer

If the quantity of money demanded is greater than the quantity supplied,then the value of money rises.

Correct AnswerverifiedShow Answer

To explain the long-run determinants of the price level and the inflation rate,most economists today rely on the

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,exces...View AnswerShow Answer

For a given level of money and real GDP,an increase in velocity would lead to an increase in the price level.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following statements about inflation is correct?

Correct AnswerverifiedShow Answer

Economists agree that

Correct AnswerverifiedShow Answer

If the CPI rises,the number of dollars needed to buy a representative basket of goods

Correct AnswerverifiedShow Answer

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Correct AnswerverifiedShow Answer

In which case is velocity the highest?

Correct AnswerverifiedShow Answer

Money demand depends on

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

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

Suppose that M is fixed.According to the quantity equation,which of the following would make the price level lower?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

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
verified
rise,exces...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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