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If the quantity of money supplied is greater than the quantity demanded,then prices should fall.

A) True
B) False

Correct Answer

verifed

verified

Suppose the nominal interest rate is 5 percent,the tax rate on interest income is 30 percent,and the after-tax real interest rate is 0.8 percent.Then the inflation rate is 2.7 percent.

A) True
B) False

Correct Answer

verifed

verified

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

A) True
B) False

Correct Answer

verifed

verified

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

A) True
B) False

Correct Answer

verifed

verified

If inflation is higher than expected,then borrowers make nominal interest payments that are less than they expected.

A) True
B) False

Correct Answer

verifed

verified

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

A) True
B) False

Correct Answer

verifed

verified

Jimmy Carter,Ronald Reagan,and Gerald Ford are all U.S.presidents whose political careers were helped by inflation.

A) True
B) False

Correct Answer

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verified

Nominal GDP measures output of final goods and services in physical terms.

A) True
B) False

Correct Answer

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verified

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

A) True
B) False

Correct Answer

verifed

verified

If money demand shifts right,the price level falls.

A) True
B) False

Correct Answer

verifed

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Hyperinflations are associated with governments printing money to finance expenditures.

A) True
B) False

Correct Answer

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verified

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

A) True
B) False

Correct Answer

verifed

verified

An excess supply of money is eliminated by a decrease in the value of money.

A) True
B) False

Correct Answer

verifed

verified

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

A) True
B) False

Correct Answer

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

A) True
B) False

Correct Answer

verifed

verified

If the money supply increased by 10% and at the same time velocity decreased by 10%,then according to the quantity equation there would be no change in the price level.

A) True
B) False

Correct Answer

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verified

The quantity theory of money can explain hyperinflations but not moderate inflation.

A) True
B) False

Correct Answer

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verified

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

A) True
B) False

Correct Answer

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verified

Shoeleather costs and menu costs are both costs of anticipated inflation.

A) True
B) False

Correct Answer

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If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

A) True
B) False

Correct Answer

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verified

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