Question 1

What was Bolivia's average inflation rate during the period of 1983-88?

Accepted Answer

A) 21% 
B) 35% 
C) 87% 
D) 382% 
E) 1,797% 
A) 21% 
B) 35% 
C) 87% 
D) 382% 
E) 1,797% D

Question 2

When an anti-inflation policy is credible,

Accepted Answer

A) a new long-run equilibrium at a lower inflation rate is reached much faster 
B) the sacrifice ratio is zero 
C) the Fed can cheat a little by letting money supply grow to avoid a recession 
D) real wages immediately adjust and thus no increase in the rate of unemployment is needed to reduce inflation 
E) there is no need for workers to adjust their wage demands, so the economy will adjust more easily to a new long-run equilibrium 
A) a new long-run equilibrium at a lower inflation rate is reached much faster 
B) the sacrifice ratio is zero 
C) the Fed can cheat a little by letting money supply grow to avoid a recession 
D) real wages immediately adjust and thus no increase in the rate of unemployment is needed to reduce inflation 
E) there is no need for workers to adjust their wage demands, so the economy will adjust more easily to a new long-run equilibrium A

Question 3

Assuming a long-run relationship, if the nominal money supply grows at a rate of 12%, the inflation rate is 8%, and real output growth is 4%, what is the percentage change in velocity?

Accepted Answer

A) 0% 
B) 4% 
C) 8% 
D) 12% 
E) 16% 
A) 0% 
B) 4% 
C) 8% 
D) 12% 
E) 16% A

Question 4

If we look at the yearly average rate of M2 growth minus the yearly average rate of GDP growth in different decades for the United States, we see that

Accepted Answer

A) from 1960 to 2009, this difference was very close to the average inflation rate 
B) from 1970 to 1979, this difference was slightly lower than the average inflation rate 
C) from 1980 to 1989, this difference was very close to the average inflation rate 
D) from 2000 to 2009, this difference was much higher than the average inflation rate 
E) all of the above 
A) from 1960 to 2009, this difference was very close to the average inflation rate 
B) from 1970 to 1979, this difference was slightly lower than the average inflation rate 
C) from 1980 to 1989, this difference was very close to the average inflation rate 
D) from 2000 to 2009, this difference was much higher than the average inflation rate 
E) all of the above

Question 5

The recent hyperinflation in Zimbabwe was finally stopped when

Accepted Answer

A) the inflation rate reached 1,000% per year 
B) the government implemented a massive tax increase 
C) the government replaced its old currency with a new currency 
D) the government made it legal for people to use foreign currencies for trade 
E) none of the above 
A) the inflation rate reached 1,000% per year 
B) the government implemented a massive tax increase 
C) the government replaced its old currency with a new currency 
D) the government made it legal for people to use foreign currencies for trade 
E) none of the above

Question 6

The long-run link between money growth and the inflation rate is not precise since

Accepted Answer

A) variations in output do not affect real money demand 
B) interest rate changes don't affect the cost of holding real money balances or the desired ratio of income to money 
C) money demand tends to shift over time as a result of financial innovation 
D) the income velocity of money has steadily declined over the last three decades 
E) all of the above 
A) variations in output do not affect real money demand 
B) interest rate changes don't affect the cost of holding real money balances or the desired ratio of income to money 
C) money demand tends to shift over time as a result of financial innovation 
D) the income velocity of money has steadily declined over the last three decades 
E) all of the above

Question 7

Which of the following is FALSE?

Accepted Answer

A) in the short run, the rate of monetary growth and the rate of inflation always follow the same pattern 
B) in the short run, a change in the growth rate of money can affect the level of output 
C) in the short run, factors other than an increase in the growth rate of money can cause inflation to increase 
D) in the long run, a sustained increase in the growth rate of money will cause the inflation rate to increase 
E) in the long run, a sustained increase in the growth rate of money will have no effect on the level of output 
A) in the short run, the rate of monetary growth and the rate of inflation always follow the same pattern 
B) in the short run, a change in the growth rate of money can affect the level of output 
C) in the short run, factors other than an increase in the growth rate of money can cause inflation to increase 
D) in the long run, a sustained increase in the growth rate of money will cause the inflation rate to increase 
E) in the long run, a sustained increase in the growth rate of money will have no effect on the level of output

Question 8

Which of the following statements is TRUE?

Accepted Answer

A) hyperinflation often occurs in the aftermath of a war 
B)  large budget deficits are typical for a country experiencing hyperinflation 
C) a government can utilize the inflation tax to finance at least part of its deficit 
D) the inflation tax revenue is equal to the inflation rate multiplied by the real money base 
E) all of the above 
A) hyperinflation often occurs in the aftermath of a war 
B)  large budget deficits are typical for a country experiencing hyperinflation 
C) a government can utilize the inflation tax to finance at least part of its deficit 
D) the inflation tax revenue is equal to the inflation rate multiplied by the real money base 
E) all of the above

Question 9

If we create a diagram with inflation tax revenue measured on the vertical axis and the inflation rate measured on the horizontal axis, we will get a curve that

Accepted Answer

A) is U-shaped 
B) is steadily increasing 
C)  is steadily declining 
D) initially increases but then decreases 
E) none of the above 
A) is U-shaped 
B) is steadily increasing 
C)  is steadily declining 
D) initially increases but then decreases 
E) none of the above

Question 10

Assuming a long-run relationship, if nominal money supply grows at a rate of 6.5%, real output growth is 3.2%, and the inflation rate is 2.8%, what is the percentage change in velocity?

Accepted Answer

A) 6)1% 
B) 0)5% 
C) 0% 
D) -0.1% 
E) -0.5% 
A) 6)1% 
B) 0)5% 
C) 0% 
D) -0.1% 
E) -0.5%

Question 11

From 1983-88, Peru had an annual inflation rate of 1,797%.What percentage of GDP did the Peruvian government raise in revenue through the so-called "inflation tax"?

Accepted Answer

A) 1)9% 
B) 3)5% 
C) 4)7% 
D) 7)2% 
E) 9)8% 
A) 1)9% 
B) 3)5% 
C) 4)7% 
D) 7)2% 
E) 9)8%

Question 12

Which of the following is NOT a monetarist proposition?

Accepted Answer

A) monetary policy is better conducted by a rule than by discretion 
B) monetary policy affects the economy with long and variable lags 
C) the Fed should undertake a more active monetary policy 
D) the private sector is inherently stable 
E) to conduct monetary policy, money targets are generally better than interest rate targets 
A) monetary policy is better conducted by a rule than by discretion 
B) monetary policy affects the economy with long and variable lags 
C) the Fed should undertake a more active monetary policy 
D) the private sector is inherently stable 
E) to conduct monetary policy, money targets are generally better than interest rate targets

Question 13

The inflation tax revenue is defined as

Accepted Answer

A) the inflation rate plus the growth in the real money base 
B) the inflation rate minus the growth in the real money base 
C) the inflation rate minus the real money base 
D) the inflation rate times the real money base 
E) the inflation rate times the growth in the real money base 
A) the inflation rate plus the growth in the real money base 
B) the inflation rate minus the growth in the real money base 
C) the inflation rate minus the real money base 
D) the inflation rate times the real money base 
E) the inflation rate times the growth in the real money base

Question 14

When we look at the period from 1960 to 2009, which of the following is TRUE on an average annual basis for the U.S.?

Accepted Answer

A) M1 grew by more than M2, but neither grew as much as GDP 
B) the rate of inflation was about the same as the growth rate of M2 
C) the rate of inflation was slightly higher than the growth rate of M1 
D) the inflation rate was about the same as the growth rate of M2 minus the GDP growth rate 
E) GDP growth exceeded the growth rate of M2 but not M1 
A) M1 grew by more than M2, but neither grew as much as GDP 
B) the rate of inflation was about the same as the growth rate of M2 
C) the rate of inflation was slightly higher than the growth rate of M1 
D) the inflation rate was about the same as the growth rate of M2 minus the GDP growth rate 
E) GDP growth exceeded the growth rate of M2 but not M1

Question 15

Which of the following is TRUE for the U.S.from 1995 to 2013?

Accepted Answer

A) the inflation rate fluctuated much less than the growth rate of M2 
B) the inflation rate and the growth rate of M2 followed very similar patterns 
C) the inflation rate averaged about 4 percent per year 
D) the growth rate of M2 averaged about 8 percent per year 
E) all of the above 
A) the inflation rate fluctuated much less than the growth rate of M2 
B) the inflation rate and the growth rate of M2 followed very similar patterns 
C) the inflation rate averaged about 4 percent per year 
D) the growth rate of M2 averaged about 8 percent per year 
E) all of the above

Question 16

In 2011, the increase in the U.S.monetary base was

Accepted Answer

A) more than 4% of GDP 
B) more than 3% of GDP 
C) almost 3% of GDP 
D) only 2% of GDP 
E) less than 1% of GDP 
A) more than 4% of GDP 
B) more than 3% of GDP 
C) almost 3% of GDP 
D) only 2% of GDP 
E) less than 1% of GDP

Question 17

In order to stop hyperinflation a government can

Accepted Answer

A) introduce new money and ensure that the money growth remains stable 
B) peg the exchange rate of the new money that is introduced to that of a stable foreign currency 
C) allow the use of another country's currency as a medium of exchange 
D) all of the above 
E) none of the above 
A) introduce new money and ensure that the money growth remains stable 
B) peg the exchange rate of the new money that is introduced to that of a stable foreign currency 
C) allow the use of another country's currency as a medium of exchange 
D) all of the above 
E) none of the above

Question 18

Which of the following countries had the LOWEST average inflation rate from 1960 - 2011?

Accepted Answer

A) Canada 
B) Italy 
C) Japan 
D) United Kingdom 
E) United States 
A) Canada 
B) Italy 
C) Japan 
D) United Kingdom 
E) United States

Question 19

Assuming a long-run relationship, if nominal money supply grows at a rate of 4.5%, real output growth is 3.2%, and the percentage change in velocity is 2%, what is the inflation rate?

Accepted Answer

A) 9)7% 
B) 5)7% 
C)  4.5% 
D) 3)3% 
E) 2)5% 
A) 9)7% 
B) 5)7% 
C)  4.5% 
D) 3)3% 
E) 2)5%

Question 20

From 1983-88, which of these countries had the HIGHEST average inflation rate?

Accepted Answer

A) Argentina 
B) Bolivia 
C) Colombia 
D) Mexico 
E) Peru 
A) Argentina 
B) Bolivia 
C) Colombia 
D) Mexico 
E) Peru

Exam 22: Inflation and hyperinflation

What was Bolivia's average inflation rate during the period of 1983-88?

When an anti-inflation policy is credible,

Assuming a long-run relationship, if the nominal money supply grows at a rate of 12%, the inflation rate is 8%, and real output growth is 4%, what is the percentage change in velocity?

If we look at the yearly average rate of M2 growth minus the yearly average rate of GDP growth in different decades for the United States, we see that

The recent hyperinflation in Zimbabwe was finally stopped when

The long-run link between money growth and the inflation rate is not precise since

Which of the following is FALSE?

Which of the following statements is TRUE?

If we create a diagram with inflation tax revenue measured on the vertical axis and the inflation rate measured on the horizontal axis, we will get a curve that

Assuming a long-run relationship, if nominal money supply grows at a rate of 6.5%, real output growth is 3.2%, and the inflation rate is 2.8%, what is the percentage change in velocity?

From 1983-88, Peru had an annual inflation rate of 1,797%.What percentage of GDP did the Peruvian government raise in revenue through the so-called "inflation tax"?

Which of the following is NOT a monetarist proposition?

The inflation tax revenue is defined as

When we look at the period from 1960 to 2009, which of the following is TRUE on an average annual basis for the U.S.?

Which of the following is TRUE for the U.S.from 1995 to 2013?

In 2011, the increase in the U.S.monetary base was

In order to stop hyperinflation a government can

Which of the following countries had the LOWEST average inflation rate from 1960 - 2011?

Assuming a long-run relationship, if nominal money supply grows at a rate of 4.5%, real output growth is 3.2%, and the percentage change in velocity is 2%, what is the inflation rate?

From 1983-88, which of these countries had the HIGHEST average inflation rate?

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Income and spending

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

International adjustment and interdependence

Advanced topics

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