Question 1

Suppose there is a surplus in the money market.

Accepted Answer

A)   This could have been created by an increase in the money supply.The value of money will rise.
B)   This could have been created by an increase in the money supply.The value of money will fall.
C)   This could have been created by a decrease in the money supply.The value of money will rise.
D)   This could have been created by a decrease in the money supply.The value of money will fall.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)   the real interest rate
B)   real GDP
C)   the real wage
D)   None of the above increases.E) A) and C)
F) C) and D)

Question 3

The U.S.Treasury Department began issuing inflation-indexed bonds in early 1997.Since these assets are virtually risk free,both in terms of default risk and inflation risk,will they quickly replace all other kinds of assets that still entail risk of one kind or another,such as ordinary government bonds or corporate bonds? Explain.

Accepted Answer

When individuals are choosing between as...

Question 4

Based on past experience,if a country is experiencing hyperinflation,then which of the following would be a reasonable guess?

Accepted Answer

A)   The country has high money supply growth.
B)   Inflation is acting like a tax on everyone who holds money.
C)   The government is printing money to finance its expenditures.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 5

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 rightward,causing the value of money measured in terms of goods and services to rise.
B)   shifts rightward,causing the value of money measured in terms of goods and services to fall.
C)   shifts leftward,causing the value of money measured in terms of goods and services to rise.
D)   shifts leftward,causing the value of money measured in terms of goods and services to fall.E) A) and B)
F) A) and C)

Question 6

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Accepted Answer

A)   7 percent
B)   5.5 percent
C)   1.75 percent
D)   1.5 percentE) None of the above
F) All of the above

Question 7

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

Question 8

When prices are falling,economists say that there is

Accepted Answer

A)   disinflation.
B)   deflation.
C)   a contraction.
D)   an inverted inflation.E) None of the above
F) B) and C)

Question 9

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent,what is the nominal interest rate?

Accepted Answer

A)   4 percent
B)   6 percent
C)   8 percent
D)   10 percentE) None of the above
F) A) and B)

Question 10

The inflation tax

Accepted Answer

A)   transfers wealth from the government to households.
B)   is the increase in income taxes due to lack of indexation.
C)   is a tax on everyone who holds money.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 11

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

Accepted Answer

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

Question 12

Suppose the nominal interest rate is 10 percent;the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Accepted Answer

A) True 
 B)False

Question 13

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Accepted Answer

A) True 
 B)False

Question 14

With the value of money on the vertical axis,the money supply curve is

Accepted Answer

A)   upward-sloping.
B)   downward-sloping.
C)   horizontal.
D)   vertical.E) All of the above
F) B) and C)

Question 15

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1 to MD2? A)  an increase in the value of money B)  a decrease in the price level C)  an open-market purchase of bonds by the Federal Reserve D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Accepted Answer

A)   an increase in the value of money
B)   a decrease in the price level
C)   an open-market purchase of bonds by the Federal Reserve
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 16

Which of the following statements about U.S.inflation is not correct?

Accepted Answer

A)   Low inflation was viewed as a triumph of President Carter's economic policy.
B)   There were long periods in the nineteenth century during which prices fell.
C)   The U.S.public has viewed inflation rates of even 7 percent as a major economic problem.
D)   The U.S.inflation rate has varied over time,but international data show even more variation.E) A) and C)
F) B) and D)

Question 17

The evidence from hyperinflations indicates that money growth and inflation

Accepted Answer

A)   are positively related,which is consistent with the quantity theory of money.
B)   are positively related,which is not consistent with the quantity theory of money.
C)   are not related in a discernible fashion,which is consistent with the quantity theory of money.
D)   are not related in a discernible fashion,which is not consistent with the quantity theory of money.E) A) and D)
F) A) and B)

Question 18

According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then

Accepted Answer

A)   both the price level and real GDP would rise by 5 percent.
B)   the price level would rise by 5 percent and real GDP would be unchanged.
C)   the price level would be unchanged and real GDP would rise by 5 percent.
D)   both the price level and real GDP would be unchanged.E) None of the above
F) B) and C)

Question 19

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) All of the above

Question 20

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

Exam 30: Money Growth and Inflation

Suppose there is a surplus in the money market.

Correct Answer
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If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent,what is the nominal interest rate?

Correct Answer
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According to the classical dichotomy,which of the following increases when the money supply increases?

Correct Answer
verified

When prices are falling,economists say that there is

Correct Answer
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Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

Correct Answer
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The evidence from hyperinflations indicates that money growth and inflation

Correct Answer
verified

With the value of money on the vertical axis,the money supply curve is

Correct Answer
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On a given morning,Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

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

According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then

Correct Answer
verified

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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When individuals are choosing between as...
View Answer

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct Answer
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The inflation tax

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

Correct Answer
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Suppose the nominal interest rate is 10 percent;the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Correct Answer
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Based on past experience,if a country is experiencing hyperinflation,then which of the following would be a reasonable guess?

Correct Answer
verified

Which of the following statements about U.S.inflation is not correct?

Correct Answer
verified

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

Correct Answer
verified

Exam 30: Money Growth and Inflation

Suppose there is a surplus in the money market.

Correct AnswerverifiedShow Answer

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent,what is the nominal interest rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When prices are falling,economists say that there is

Correct AnswerverifiedShow Answer

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Correct AnswerverifiedShow Answer

The evidence from hyperinflations indicates that money growth and inflation

Correct AnswerverifiedShow Answer

With the value of money on the vertical axis,the money supply curve is

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

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

Correct AnswerverifiedShow Answer

According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then

Correct AnswerverifiedShow Answer

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWhen individuals are choosing between as...View AnswerShow Answer

The nominal interest rate is 3.5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct AnswerverifiedShow Answer

The inflation tax

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate is 10 percent;the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

Correct AnswerverifiedShow Answer

Based on past experience,if a country is experiencing hyperinflation,then which of the following would be a reasonable guess?

Correct AnswerverifiedShow Answer

Which of the following statements about U.S.inflation is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

Correct Answer
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When individuals are choosing between as...
View Answer

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