Question 1

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately

Accepted Answer

A)   3.0
B)   6.0
C)   9.0
D)   1.5E) A) and B)
F) A) and C)

Question 2

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

Accepted Answer

A)   the inflation rate and the nominal interest rate by the same number of percentage points.
B)   nominal interest rates but by less than the percentage point increase in the inflation rate.
C)   the inflation rate but not the nominal interest.
D)   neither the inflation rate nor the nominal interest rate.E) B) and D)
F) B) and C)

Question 3

Suppose that velocity rises while the money supply stays the same. It follows that

Accepted Answer

A)   P x Y must rise.
B)   P x Y must fall.
C)   P x Y must be unchanged.
D)   the effects on P x Y are uncertain.E) B) and C)
F) B) and D)

Question 4

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Accepted Answer

The answer of During hyperinflations, people desire to hold less...

Question 5

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

Question 6

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Accepted Answer

A) True 
 B)False

Question 7

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Accepted Answer

A)   both the classical dichotomy and the quantity theory of money.
B)   the classical dichotomy, but not the quantity theory of money.
C)   the quantity theory of money, but not the classical dichotomy.
D)   neither the classical dichotomy nor the quantity theory of money.E) B) and C)
F) A) and D)

Question 8

Economic variables whose values are measured in goods are called

Accepted Answer

A)   dichotomous variables.
B)   nominal variables.
C)   classical variables.
D)   real variables.E) None of the above
F) A) and B)

Question 9

If Y and M are constant and V doubles, the quantity equation implies that the price level

Accepted Answer

A)   falls to half its original level.
B)   doubles.
C)   more than doubles.
D)   does not change.E) None of the above
F) C) and D)

Question 10

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Accepted Answer

The answer of In the early 1920s U.S. consumer prices...

Question 11

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Accepted Answer

A)   M = $500, V = 4.
B)   M = $250, V = 8.
C)   M = $1,000, V = 2.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 12

Open-market purchases by the Fed

Accepted Answer

A)   make the price level and value of money fall.
B)   make the price level rise, and make the value of money fall.
C)   make the price level and make the value of money rise.
D)   make the price level fall, and make the value of money rise.E) None of the above
F) C) and D)

Question 13

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

Accepted Answer

A)   raised both the price level and the value of gold in Cairo.
B)   raised the price level, but decreased the value of gold in Cairo.
C)   lowered the price level, but increased the value of gold in Cairo.
D)   lowered both the price level and the value of gold in Cairo.E) A) and B)
F) B) and C)

Question 14

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

Accepted Answer

A)   3.33.
B)   0.83.
C)   1.20.
D)   13.33.E) B) and D)
F) A) and C)

Question 15

The price of a Honda Accord

Accepted Answer

A)   and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B)   and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C)   is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
D)   is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.E) A) and B)
F) All of the above

Question 16

If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply

Accepted Answer

A)   decreases the price level by 2 percent.
B)   decreases the price level by less than 2 percent.
C)   increases the price level by less than 2 percent.
D)   increases the price level by 2 percent.E) A) and B)
F) A) and C)

Question 17

Which of the following is accurate?

Accepted Answer

A)   Monetary policy is neutral in both the short run and the long run.
B)   Though monetary policy is neutral in the long run, it may have effects on real variables in the short run.
C)   Monetary policy has profound effects on real variables in both the short run and the long run.
D)   Monetary policy has profound effects on real variables in the long run, but is neutral in the short run.E) B) and C)
F) A) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Inflation is problematic if

Accepted Answer

A)   it is less than the percentage increase in nominal income.
B)   it is less than the nominal return on saving.
C)   it equals the growth rate of real GDP in the long run.
D)   it distorts relative prices, causing a misallocation of resources.E) A) and D)
F) A) and C)

Question 20

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

Correct Answer
verified

If Y and M are constant and V doubles, the quantity equation implies that the price level

Correct Answer
verified

Correct Answer
verified

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

Correct Answer
verified

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

Correct Answer
verified

Open-market purchases by the Fed

Correct Answer
verified

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Correct Answer
verified

The price of a Honda Accord

Correct Answer
verified

Which of the following is accurate?

Correct Answer
verified

Suppose that velocity rises while the money supply stays the same. It follows that

Correct Answer
verified

Economic variables whose values are measured in goods are called

Correct Answer
verified

If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply

Correct Answer
verified

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

Correct Answer
verified

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Correct Answer
verified

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Correct Answer
verified

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

Correct Answer
verified

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

Correct Answer
verified

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Correct Answer
verified

Inflation is problematic if

Correct Answer
verified

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

Correct Answer
verified

Exam 30: Money Growth and Inflation

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

Correct AnswerverifiedShow Answer

If Y and M are constant and V doubles, the quantity equation implies that the price level

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

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

Open-market purchases by the Fed

Correct AnswerverifiedShow Answer

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Correct AnswerverifiedShow Answer

The price of a Honda Accord

Correct AnswerverifiedShow Answer

Which of the following is accurate?

Correct AnswerverifiedShow Answer

Suppose that velocity rises while the money supply stays the same. It follows that

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in goods are called

Correct AnswerverifiedShow Answer

If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply

Correct AnswerverifiedShow Answer

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Correct AnswerverifiedShow Answer

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Correct AnswerverifiedShow Answer

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

Correct AnswerverifiedShow Answer

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Correct AnswerverifiedShow Answer

Inflation is problematic if

Correct AnswerverifiedShow Answer

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

Correct AnswerverifiedShow Answer

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In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

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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