Question 1

The hyperinflation episodes in Brazil and Chile are evidence of the correlation between money supply and prices.

Accepted Answer

A) True 
 B)False

Question 2

If the Fed purchases $20 million worth of government bonds from Bank Zip, Bank Zip will be able to increase its loans as a result of the bond purchase.

Accepted Answer

A) True 
 B)False

Question 3

Over the period 1973 through 1991, for the largest developed economies in the world, there has been

Accepted Answer

A) a positive correlation between the growth rate of money and the rate of inflation. 
B) no correlation between money and the rate of inflation. 
C) a negative correlation between the growth rate of money and the rate of inflation. 
D) a negative correlation between the growth rate of money and the growth of velocity. 
E) a positive correlation between the growth rate of money and real GDP. 
A) a positive correlation between the growth rate of money and the rate of inflation. 
B) no correlation between money and the rate of inflation. 
C) a negative correlation between the growth rate of money and the rate of inflation. 
D) a negative correlation between the growth rate of money and the growth of velocity. 
E) a positive correlation between the growth rate of money and real GDP.

Question 4

The quantity equation is written as

Accepted Answer

A) MP = YV. 
B) MY = PV. 
C) MV = PY. 
D) M = PYV. 
E) MPY = V. 
A) MP = YV. 
B) MY = PV. 
C) MV = PY. 
D) M = PYV. 
E) MPY = V.

Question 5

Items in M1 are more liquid than items in M2.

Accepted Answer

A) True 
 B)False

Question 6

When something is generally accepted as a means of payment, such as grain in many traditional societies, we say that this represents

Accepted Answer

A) money as a medium of exchange. 
B) money as a store of value. 
C) money as a unit of wealth. 
D) an inflationary danger. 
E) a government opportunity for social control. 
A) money as a medium of exchange. 
B) money as a store of value. 
C) money as a unit of wealth. 
D) an inflationary danger. 
E) a government opportunity for social control.

Question 7

The major factor determining velocity is

Accepted Answer

A) how efficiently money is used. 
B) Federal Reserve policy. 
C) nominal GDP. 
D) the supply of money. 
E) real GDP. 
A) how efficiently money is used. 
B) Federal Reserve policy. 
C) nominal GDP. 
D) the supply of money. 
E) real GDP.

Question 8

Exhibit 22-3
  
-According to the data in Exhibit 22-3, the rate of inflation between 2013 and 2014 was

Accepted Answer

A) 4.3 percent. 
B) 2.2 percent. 
C) 1.1 percent. 
D) 0 percent. 
E) -3.1 percent. 
A) 4.3 percent. 
B) 2.2 percent. 
C) 1.1 percent. 
D) 0 percent. 
E) -3.1 percent.

Question 9

The Board of Governors of the Federal Reserve is

Accepted Answer

A) appointed by the president and confirmed by the Senate, and each governor serves a 14-year term. 
B) elected by Congress, and each governor serves a 10-year term. 
C) elected by Congress, and each governor serves a 4-year term. 
D) elected by Congress, and each governor serves a 7-year term. 
E) appointed by the president and confirmed by the Senate, and each governor serves a 7-year term. 
A) appointed by the president and confirmed by the Senate, and each governor serves a 14-year term. 
B) elected by Congress, and each governor serves a 10-year term. 
C) elected by Congress, and each governor serves a 4-year term. 
D) elected by Congress, and each governor serves a 7-year term. 
E) appointed by the president and confirmed by the Senate, and each governor serves a 7-year term.

Question 10

Which of the following will cause an increase in the money supply?

Accepted Answer

A) An increase in the required reserve ratio 
B) An increase in crime 
C) Increased interest rates on credit cards 
D) A tax on credit card purchases 
E) A decrease in crime 
A) An increase in the required reserve ratio 
B) An increase in crime 
C) Increased interest rates on credit cards 
D) A tax on credit card purchases 
E) A decrease in crime

Question 11

In the long run, a decrease in the money supply

Accepted Answer

A) is expected to lead to a decrease in nominal GDP. 
B) is expected to lead to a decrease in velocity. 
C) is expected to lead to an increase in nominal GDP. 
D) is expected to lead to an increase in velocity. 
E) has no predictable effect on nominal GDP. 
A) is expected to lead to a decrease in nominal GDP. 
B) is expected to lead to a decrease in velocity. 
C) is expected to lead to an increase in nominal GDP. 
D) is expected to lead to an increase in velocity. 
E) has no predictable effect on nominal GDP.

Question 12

To affect bank reserves and deposits, the Fed has to buy securities directly from a bank.

Accepted Answer

A) True 
 B)False

Question 13

The money supply is the sum of the currency in circulation.

Accepted Answer

A) True 
 B)False

Exam 22: Money and Inflation

The hyperinflation episodes in Brazil and Chile are evidence of the correlation between money supply and prices.

If the Fed purchases $20 million worth of government bonds from Bank Zip, Bank Zip will be able to increase its loans as a result of the bond purchase.

Over the period 1973 through 1991, for the largest developed economies in the world, there has been

The quantity equation is written as

Items in M1 are more liquid than items in M2.

When something is generally accepted as a means of payment, such as grain in many traditional societies, we say that this represents

The major factor determining velocity is

Exhibit 22-3 -According to the data in Exhibit 22-3, the rate of inflation between 2013 and 2014 was

The Board of Governors of the Federal Reserve is

Which of the following will cause an increase in the money supply?

In the long run, a decrease in the money supply

To affect bank reserves and deposits, the Fed has to buy securities directly from a bank.

The money supply is the sum of the currency in circulation.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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