Question 1

In the U.S., from the early 1980s through the early 1990s,

Accepted Answer

A)   both inflation and nominal interest rates rose.
B)   both inflation and nominal interest rates fell.
C)   the inflation rate fell and the nominal interest rate rose.
D)   the inflation rate rose and the nominal interest rate fell.E) A) and C)
F) C) and D)

Question 2

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 3

Figure 30-1 
-Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Accepted Answer

A)   demand for money that is represented by the distance between points A and C.
B)   demand for money that is represented by the distance between points A and B.
C)   supply of money that is represented by the distance between points A and C.
D)   supply of money that is represented by the distance between points A and B.E) A) and B)
F) All of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Accepted Answer

double, re...

Question 6

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

Accepted Answer

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

Question 7

If P denotes the price of goods and services measured in terms of money, then

Accepted Answer

A)   1/P represents the value of money measured in terms of goods and services.
B)   P can be regarded as the "overall price level."
C)   an increase in the value of money is associated with a decrease in P.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 8

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 9

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Accepted Answer

A)   shifts right, causing the price level to rise.
B)   shifts right, causing the price level to fall.
C)   shifts left, causing the price level to rise.
D)   shifts left, causing the price level to fall.E) B) and C)
F) A) and C)

Question 10

As the Consumer Price Index increases, the value of money

Accepted Answer

A)   falls, so people hold more money to buy the goods and services they want.
B)   falls, so people hold less money to buy the goods and services they want.
C)   rises, so people hold more money to buy the goods and services they want.
D)   rises, so people hold less money to buy the goods and services they want.E) All of the above
F) C) and D)

Question 11

If P denotes the price of goods and services measured in terms of money, then

Accepted Answer

A)   1/P represents the value of money measured in terms of goods and services.
B)   P can be interpreted as the inflation rate.
C)   the supply of money influences the value of P, but the demand for money does not.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 12

When the money market is drawn with the value of money on the vertical axis, the price level increases 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) B) and D)
F) None of the above

Question 13

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

Accepted Answer

A)   menu costs and shoeleather costs
B)   menu costs but not shoeleather costs
C)   shoeleather costs but not menu costs
D)   menu costs but  shoeleather costsE) None of the above
F) B) and C)

Question 14

You put money in the bank. The increase in the dollar value of your savings

Accepted Answer

A)   and the change in the number of goods you can buy with your savings are both nominal variables.
B)   and the change in the number of goods you can buy with your savings are both real variables.
C)   is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
D)   is a real variable, but the change in the number of goods you buy with your savings is a nominal variable.E) A) and B)
F) None of the above

Question 15

When inflation causes relative-price variability,

Accepted Answer

A)   consumer decisions are distorted and the ability of markets to efficiently allocate factors of production is impaired.
B)   consumer decisions are distorted, but markets are still able to efficiently allocate factors of production.
C)   consumer decisions are not distorted, but the ability of markets to efficiently allocate factors of production is impaired.
D)   consumer decisions are not distorted and markets are still able to efficiently allocate factors of production.E) A) and D)
F) A) and C)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A decrease in the overall price level or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

Accepted Answer

deflation,...

Question 18

The source of hyperinflations is primarily

Accepted Answer

A)   lower output growth.
B)   continuing declines in velocity.
C)   increases in money-supply growth.
D)   continuing increases in money demand.E) B) and C)
F) B) and D)

Question 19

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

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 B)
F) All of the above

Question 20

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 D)
F) A) and B)

Exam 22: Money Growth and Inflation

When the money market is drawn with the value of money on the vertical axis, the price level increases if

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

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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.

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

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A decrease in the overall price level or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

Correct Answerverifieddeflation,...View AnswerShow Answer

In the U.S., from the early 1980s through the early 1990s,

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If P denotes the price of goods and services measured in terms of money, then

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Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

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When inflation causes relative-price variability,

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When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

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As the Consumer Price Index increases, the value of money

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

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Which of the following statements about inflation is correct?

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

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If P denotes the price of goods and services measured in terms of money, then

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The source of hyperinflations is primarily

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Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

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According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Correct Answerverifieddouble, re...View AnswerShow Answer

You put money in the bank. The increase in the dollar value of your savings

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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A decrease in the overall price level or falling prices) is called _. An extraordinarily high rate of inflation is called _.

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deflation,...
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double, re...
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