Question 1

What is the price of Land Rover SUV divided by the price of a Nissan car called?

Accepted Answer

A)  an inflated variable 
B)  a dichotomous variable 
C)  a nominal variable 
D)  a real variable 
A)  an inflated variable 
B)  a dichotomous variable 
C)  a nominal variable 
D)  a real variable

Question 2

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate but no change in the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 3

The money supply in Goldova is $100 billion. Nominal GDP is $400 billion, and real GDP is $200 billion. What is the price level in Goldova?

Accepted Answer

A)  1 
B)  2 
C)  4 
D)  8 
A)  1 
B)  2 
C)  4 
D)  8

Question 4

Rebecca pays $50 for a toy she purchases at the Kids Will Love It store. Which statement accurately identifies the types of variables involved?

Accepted Answer

A)  The $50 is a real variable; the toy is a nominal variable. 
B)  The $50 is a nominal variable; the toy is a real variable. 
C)  Both the $50 and the toy are nominal variables. 
D)  Both the $50 and the toy are real variables. 
A)  The $50 is a real variable; the toy is a nominal variable. 
B)  The $50 is a nominal variable; the toy is a real variable. 
C)  Both the $50 and the toy are nominal variables. 
D)  Both the $50 and the toy are real variables.

Question 5

If your salary increased by 9 percent and prices increased by 3 percent, how much did your real wage rise by?

Accepted Answer

A)  3 percent 
B)  6 percent 
C)  12 percent 
D)  27 percent 
A)  3 percent 
B)  6 percent 
C)  12 percent 
D)  27 percent

Question 6

For a given real interest rate, which statement best describes the effects of an increase in inflation?

Accepted Answer

A)  Inflation makes the real interest rate decrease, which encourages savings. 
B)  Inflation makes the real interest rate decrease, which discourages savings. 
C)  Inflation makes the real interest rate increase, which encourages savings. 
D)  Inflation makes the real interest rate increase, which discourages savings. 
A)  Inflation makes the real interest rate decrease, which encourages savings. 
B)  Inflation makes the real interest rate decrease, which discourages savings. 
C)  Inflation makes the real interest rate increase, which encourages savings. 
D)  Inflation makes the real interest rate increase, which discourages savings.

Question 7

How can inflation be measured?

Accepted Answer

A)  by the change in the consumer price index 
B)  by the percentage change in the consumer price index 
C)  by the percentage change in nominal GDP 
D)  by the change in the price of a specific commodity 
A)  by the change in the consumer price index 
B)  by the percentage change in the consumer price index 
C)  by the percentage change in nominal GDP 
D)  by the change in the price of a specific commodity

Question 8

Inflation distorts savings because people pay taxes on their nominal rather than their real interest income.

Accepted Answer

A) True 
 B)False

Question 9

In a graph having the price level P on the vertical axis and the quantity of money M on the horizontal axis and considering V and Y independent on the price level or the quantity of money demanded, draw the Md - P curve that is implied by the quantity equation. Show how the P?2-Md curve changes when Y changes.

Accepted Answer

When Y increases from Y1 to Y2, the slop

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

When the number of dollars needed to buy a representative basket of goods falls, what happens to the value of money?

Accepted Answer

A)  It rises, and so the price level rises. 
B)  It rises, and so the price level falls. 
C)  It falls, and so the price level rises. 
D)  It falls, and so the price level falls. 
A)  It rises, and so the price level rises. 
B)  It rises, and so the price level falls. 
C)  It falls, and so the price level rises. 
D)  It falls, and so the price level falls.

Question 12

According to the classical dichotomy, what increases when the money supply increases?

Accepted Answer

A)  the real interest rate 
B)  the real GDP 
C)  the value of money 
D)  the price level 
A)  the real interest rate 
B)  the real GDP 
C)  the value of money 
D)  the price level

Question 13

If the nominal interest rate is 6 percent and the real interest rate is 4 percent, what is the inflation rate?

Accepted Answer

A)  1.5 percent 
B)  2 percent 
C)  5 percent 
D)  10 percent 
A)  1.5 percent 
B)  2 percent 
C)  5 percent 
D)  10 percent

Question 14

Explain the adjustment process that creates a change in the price level when the money supply increases.

Accepted Answer

When the money supply increases, there i

Question 15

Which statement best describes the evolution of inflation in Canada?

Accepted Answer

A)  It was a constant 6 percent through the 2000s. 
B)  The inflation rate was, on average, 0 percent during the 1980s. 
C)  During the 1990s, prices rose at an average rate of 2 percent per year. 
D)  During the 1970s, there was deflation. 
A)  It was a constant 6 percent through the 2000s. 
B)  The inflation rate was, on average, 0 percent during the 1980s. 
C)  During the 1990s, prices rose at an average rate of 2 percent per year. 
D)  During the 1970s, there was deflation.

Question 16

Consider the quantity equation MV = PY. Assume that the money market is in equilibrium, where the money supply equals the demand for money, MS = MD = M. Assume also that the velocity of money is constant. In a graph with P on the vertical axis and Y on the horizontal axis, draw the relationship Y(P) implied by the quantity theory. How could this curve be interpreted? How does it change when MS increases?

Accepted Answer

The quantity equation MV = PY states tha

Question 17

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the left.

Accepted Answer

A) True 
 B)False

Question 18

What does nominal GDP measure?

Accepted Answer

A)  the total quantity of final goods and services produced 
B)  the dollar value of the economy's output of final goods and services 
C)  the total income received from producing final goods and services in constant dollars 
D)  the percentage change in price level 
A)  the total quantity of final goods and services produced 
B)  the dollar value of the economy's output of final goods and services 
C)  the total income received from producing final goods and services in constant dollars 
D)  the percentage change in price level

Question 19

What idea does the classical dichotomy refer to?

Accepted Answer

A)  The supply of money is irrelevant for understanding the determinants of nominal and real variables. 
B)  The supply of money determines nominal variables, but not real variables. 
C)  The supply of money determines real variables, but not nominal variables. 
D)  The supply of money is a determinant of both real and nominal variables. 
A)  The supply of money is irrelevant for understanding the determinants of nominal and real variables. 
B)  The supply of money determines nominal variables, but not real variables. 
C)  The supply of money determines real variables, but not nominal variables. 
D)  The supply of money is a determinant of both real and nominal variables.

Question 20

Given a nominal interest rate of 10 percent, when would you earn the highest after-tax real interest rate?

Accepted Answer

A)  Inflation is 1 percent, and the tax rate is 50 percent. 
B)  Inflation is 3 percent, and the tax rate is 40 percent. 
C)  Inflation is 4 percent, and the tax rate is 30 percent 
D)  Inflation is 5 percent, and the tax rate is 20 percent. 
A)  Inflation is 1 percent, and the tax rate is 50 percent. 
B)  Inflation is 3 percent, and the tax rate is 40 percent. 
C)  Inflation is 4 percent, and the tax rate is 30 percent 
D)  Inflation is 5 percent, and the tax rate is 20 percent.

What is the price of Land Rover SUV divided by the price of a Nissan car called?

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate but no change in the nominal interest rate.

The money supply in Goldova is $100 billion. Nominal GDP is $400 billion, and real GDP is $200 billion. What is the price level in Goldova?

Rebecca pays $50 for a toy she purchases at the Kids Will Love It store. Which statement accurately identifies the types of variables involved?

If your salary increased by 9 percent and prices increased by 3 percent, how much did your real wage rise by?

For a given real interest rate, which statement best describes the effects of an increase in inflation?

How can inflation be measured?

Inflation distorts savings because people pay taxes on their nominal rather than their real interest income.

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

When the number of dollars needed to buy a representative basket of goods falls, what happens to the value of money?

According to the classical dichotomy, what increases when the money supply increases?

If the nominal interest rate is 6 percent and the real interest rate is 4 percent, what is the inflation rate?

Explain the adjustment process that creates a change in the price level when the money supply increases.

Which statement best describes the evolution of inflation in Canada?

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the left.

What does nominal GDP measure?

What idea does the classical dichotomy refer to?

Given a nominal interest rate of 10 percent, when would you earn the highest after-tax real interest rate?

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

What is the price of Land Rover SUV divided by the price of a Nissan car called?

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate but no change in the nominal interest rate.

The money supply in Goldova is $100 billion. Nominal GDP is $400 billion, and real GDP is $200 billion. What is the price level in Goldova?

Rebecca pays $50 for a toy she purchases at the Kids Will Love It store. Which statement accurately identifies the types of variables involved?

If your salary increased by 9 percent and prices increased by 3 percent, how much did your real wage rise by?

For a given real interest rate, which statement best describes the effects of an increase in inflation?

How can inflation be measured?

Inflation distorts savings because people pay taxes on their nominal rather than their real interest income.

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

When the number of dollars needed to buy a representative basket of goods falls, what happens to the value of money?

According to the classical dichotomy, what increases when the money supply increases?

If the nominal interest rate is 6 percent and the real interest rate is 4 percent, what is the inflation rate?

Explain the adjustment process that creates a change in the price level when the money supply increases.

Which statement best describes the evolution of inflation in Canada?

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the left.

What does nominal GDP measure?

What idea does the classical dichotomy refer to?

Given a nominal interest rate of 10 percent, when would you earn the highest after-tax real interest rate?

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