Question 1

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Accepted Answer

Inflation raised the general price level

Question 2

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Accepted Answer

A)  a nominal and real gain 
B)  a nominal and real loss 
C)  a nominal loss and a real gain 
D)  a nominal gain and a real loss 
A)  a nominal and real gain 
B)  a nominal and real loss 
C)  a nominal loss and a real gain 
D)  a nominal gain and a real loss

Question 3

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if:
a. the Bank of Canada increases the money supply.
b. people decide to demand less money at each value of money.

Accepted Answer

a. The Bank of Canada increases the mone

Question 4

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars)?

Accepted Answer

A)  -$64,000 
B)  -$36,000 
C)  -$16,667 
D)  -$3333 
A)  -$64,000 
B)  -$36,000 
C)  -$16,667 
D)  -$3333

Question 5

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Accepted Answer

A)  The price level and the quantity of money demanded increases. 
B)  The price level increases, but the quantity of money demanded decreases. 
C)  The price level decreases, but the quantity of money demanded increases. 
D)  The price level and the quantity of money demanded decreases. 
A)  The price level and the quantity of money demanded increases. 
B)  The price level increases, but the quantity of money demanded decreases. 
C)  The price level decreases, but the quantity of money demanded increases. 
D)  The price level and the quantity of money demanded decreases.

Question 6

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Accepted Answer

Figure 11-2 @#IMG-DLM& When the Bank of Canada sel

Question 7

What does the Fisher effect imply?

Accepted Answer

A)  The nominal interest rate adjusts one for one with the inflation rate. 
B)  The growth rate of the money supply determines the inflation rate. 
C)  Real variables are heavily influenced by the monetary system. 
D)  The real interest rate adjusts one for one with the inflation rate. 
A)  The nominal interest rate adjusts one for one with the inflation rate. 
B)  The growth rate of the money supply determines the inflation rate. 
C)  Real variables are heavily influenced by the monetary system. 
D)  The real interest rate adjusts one for one with the inflation rate.

Question 8

What type of variable is the price level?

Accepted Answer

A)  calculable 
B)  efficient 
C)  real 
D)  nominal 
A)  calculable 
B)  efficient 
C)  real 
D)  nominal

Question 9

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

Accepted Answer

A)  There is a shortage, so the price level will rise. 
B)  There is a shortage, so the price level will fall. 
C)  There is a surplus, so the price level will rise. 
D)  There is a surplus, so the price level will fall. 
A)  There is a shortage, so the price level will rise. 
B)  There is a shortage, so the price level will fall. 
C)  There is a surplus, so the price level will rise. 
D)  There is a surplus, so the price level will fall.

Question 10

What does the principle of monetary neutrality imply?

Accepted Answer

A)  An increase in the money supply will increase real GDP and the price level. 
B)  An increase in the money supply will increase real GDP, but not the price level. 
C)  An increase in the money supply will increase the price level, but not real GDP. 
D)  An increase in the money supply will increase neither the price level nor real GDP. 
A)  An increase in the money supply will increase real GDP and the price level. 
B)  An increase in the money supply will increase real GDP, but not the price level. 
C)  An increase in the money supply will increase the price level, but not real GDP. 
D)  An increase in the money supply will increase neither the price level nor real GDP.

Question 11

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

Accepted Answer

A)  an increase in the price level 
B)  a decrease in the price level 
C)  a decrease in real GDP 
D)  an increase in real GDP 
A)  an increase in the price level 
B)  a decrease in the price level 
C)  a decrease in real GDP 
D)  an increase in real GDP

Question 12

What are people required to report on income tax forms?

Accepted Answer

A)  nominal interest earnings 
B)  real interest earnings 
C)  real capital gains 
D)  expected inflation 
A)  nominal interest earnings 
B)  real interest earnings 
C)  real capital gains 
D)  expected inflation

Question 13

What terms refers to the cost of changing price tags and price listings?

Accepted Answer

A)  inflation-induced tax distortions 
B)  resource misallocation costs 
C)  shoe leather costs 
D)  menu costs 
A)  inflation-induced tax distortions 
B)  resource misallocation costs 
C)  shoe leather costs 
D)  menu costs

Question 14

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

Accepted Answer

A) True 
 B)False

Question 15

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Accepted Answer

A)  if either money demand or money supply shifts right 
B)  if either money demand or money supply shifts left 
C)  if money demand shifts right or money supply shifts left 
D)  if money demand shifts left or money supply shifts right 
A)  if either money demand or money supply shifts right 
B)  if either money demand or money supply shifts left 
C)  if money demand shifts right or money supply shifts left 
D)  if money demand shifts left or money supply shifts right

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Bank of Canada increases the money supply. b. people decide to demand less money at each value of money.

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars)?

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

What does the Fisher effect imply?

What type of variable is the price level?

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

What does the principle of monetary neutrality imply?

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

What are people required to report on income tax forms?

What terms refers to the cost of changing price tags and price listings?

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 11: Money Growth and Inflation

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Bank of Canada increases the money supply. b. people decide to demand less money at each value of money.

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars)?

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

What does the Fisher effect imply?

What type of variable is the price level?

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

What does the principle of monetary neutrality imply?

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

What are people required to report on income tax forms?

What terms refers to the cost of changing price tags and price listings?

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters