Question 1

When people refer to inflation,are they generally referring to asset price inflation or goods price inflation? What is the difference between the two?

Accepted Answer

When people refer to inflation,they are

Question 2

If the velocity of money is increasing, but the money supply is not, it is likely the economy is experiencing:

Accepted Answer

A) a trade deficit. 
B) deflation. 
C) growth. 
D) inflation. 
A) a trade deficit. 
B) deflation. 
C) growth. 
D) inflation.

Question 3

Refer to the graphs shown. Which of the graphs correctly depict the long-run Phillips curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 4

The institutionalist theory of inflation differs from that of the quantity theory by focusing on:

Accepted Answer

A) how firms determine wages and prices. 
B) the equation of exchange. 
C) the rate of growth in the money supply. 
D) the institutions that influence how the money supply is determined. 
A) how firms determine wages and prices. 
B) the equation of exchange. 
C) the rate of growth in the money supply. 
D) the institutions that influence how the money supply is determined.

Question 5

The Phillips curve represents a relationship between:

Accepted Answer

A) inflation and unemployment. 
B) inflation and real income. 
C) money supply and interest rates. 
D) money supply and unemployment. 
A) inflation and unemployment. 
B) inflation and real income. 
C) money supply and interest rates. 
D) money supply and unemployment.

Question 6

A cost of inflation is that it:

Accepted Answer

A) makes everyone poorer. 
B) makes the poor poorer and the rich richer. 
C) reduces the informational content of prices. 
D) it raises real interest rates. 
A) makes everyone poorer. 
B) makes the poor poorer and the rich richer. 
C) reduces the informational content of prices. 
D) it raises real interest rates.

Question 7

If monetary policy makers want to target a negative interest rate, they:

Accepted Answer

A) cannot do so since negative interest rates are impossible. 
B) need to stop inflation before they do it. 
C) need to encourage inflation before they do it. 
D) need to stop asset inflation before they do it. 
A) cannot do so since negative interest rates are impossible. 
B) need to stop inflation before they do it. 
C) need to encourage inflation before they do it. 
D) need to stop asset inflation before they do it.

Question 8

One assumption that changes the equation of exchange into the quantity theory of money is:

Accepted Answer

A) velocity remains constant. 
B) real output varies with the money supply. 
C) expectations change with inflation. 
D) price times quantity equals nominal output. 
A) velocity remains constant. 
B) real output varies with the money supply. 
C) expectations change with inflation. 
D) price times quantity equals nominal output.

Question 9

According to institutionally-focused economists,

Accepted Answer

A) the direction of causation goes from MV to PQ. 
B) asset inflation is a phenomenon that cannot occur. 
C) inflation is double the rise in money supply. 
D) price-setting conventions by institutions are the source of inflation. 
A) the direction of causation goes from MV to PQ. 
B) asset inflation is a phenomenon that cannot occur. 
C) inflation is double the rise in money supply. 
D) price-setting conventions by institutions are the source of inflation.

Question 10

The short-run Phillips curve tells policy makers that if inflation is currently 6 percent and unemployment is 4 percent, measures to reduce the inflation rate to 4 percent will most likely lead to an unemployment rate of:

Accepted Answer

A) 0 percent. 
B) 2 percent. 
C) 4 percent. 
D) 6 percent. 
A) 0 percent. 
B) 2 percent. 
C) 4 percent. 
D) 6 percent.

Question 11

What is the equation of exchange? State the equation and define its terms

Accepted Answer

The equation of exchange is an equation

Question 12

Who wins and who loses when there is unexpected inflation? Explain and offer an example.

Accepted Answer

When there is an unexpected inflation,th

Question 13

Asset inflation has a danger of:

Accepted Answer

A) obscuring goods inflation. 
B) accommodating contractionary monetary policy. 
C) reducing the productive capacity of assets. 
D) leading to a misallocation of resources to risky investments. 
A) obscuring goods inflation. 
B) accommodating contractionary monetary policy. 
C) reducing the productive capacity of assets. 
D) leading to a misallocation of resources to risky investments.

Question 14

Expectations of inflation are assumed to be constant at each point on a given short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 15

Economists who accept the quantity theory of money believe that inflation is always and everywhere a monetary phenomenon.

Accepted Answer

A) True 
 B)False

Question 16

Define the short-run Phillips curve.

Accepted Answer

The short-run Phillips curve is a downwa

Question 17

If the velocity of money is about 1.8 and the money stock is about $8 trillion, what is the real GDP?

Accepted Answer

A) $0.8 trillion 
B) $4.4 trillion 
C) $14.2 trillion 
D) We cannot compute real GDP from the data; we can only compute nominal GDP. 
A) $0.8 trillion 
B) $4.4 trillion 
C) $14.2 trillion 
D) We cannot compute real GDP from the data; we can only compute nominal GDP.

Question 18

Refer to the graph shown. Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the long run, this policy would most likely:

Accepted Answer

A) raise inflation to 9 percent but leave unemployment at 5.5 percent. 
B) lower inflation to 3 percent but leave unemployment at 5.5 percent. 
C) raise inflation to 9 percent but lower unemployment to 4 percent. 
D) lower inflation to 3 percent but raise unemployment to 7.5 percent. 
A) raise inflation to 9 percent but leave unemployment at 5.5 percent. 
B) lower inflation to 3 percent but leave unemployment at 5.5 percent. 
C) raise inflation to 9 percent but lower unemployment to 4 percent. 
D) lower inflation to 3 percent but raise unemployment to 7.5 percent.

Question 19

Refer to the graph shown. If expected inflation increases from 0 percent to 6 percent, the:

Accepted Answer

A) short-run Phillips curve will shift from PC2 to PC1. 
B) short-run Phillips curve will shift from PC1 to PC2.  
C) economy will move from point C to point A. 
D) economy will move from point B to point C. 
A) short-run Phillips curve will shift from PC2 to PC1. 
B) short-run Phillips curve will shift from PC1 to PC2.  
C) economy will move from point C to point A. 
D) economy will move from point B to point C.

Question 20

Suppose the money supply is $100 billion and nominal GDP is $500 billion.What is the velocity of money?

Accepted Answer

Using the equation o

Exam 34: Inflation, Deflation, and Macro Policy

When people refer to inflation,are they generally referring to asset price inflation or goods price inflation? What is the difference between the two?

If the velocity of money is increasing, but the money supply is not, it is likely the economy is experiencing:

Refer to the graphs shown. Which of the graphs correctly depict the long-run Phillips curve?

The institutionalist theory of inflation differs from that of the quantity theory by focusing on:

The Phillips curve represents a relationship between:

A cost of inflation is that it:

If monetary policy makers want to target a negative interest rate, they:

One assumption that changes the equation of exchange into the quantity theory of money is:

According to institutionally-focused economists,

The short-run Phillips curve tells policy makers that if inflation is currently 6 percent and unemployment is 4 percent, measures to reduce the inflation rate to 4 percent will most likely lead to an unemployment rate of:

What is the equation of exchange? State the equation and define its terms

Who wins and who loses when there is unexpected inflation? Explain and offer an example.

Asset inflation has a danger of:

Expectations of inflation are assumed to be constant at each point on a given short-run Phillips curve.

Economists who accept the quantity theory of money believe that inflation is always and everywhere a monetary phenomenon.

Define the short-run Phillips curve.

If the velocity of money is about 1.8 and the money stock is about $8 trillion, what is the real GDP?

Refer to the graph shown. Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the long run, this policy would most likely:

Refer to the graph shown. If expected inflation increases from 0 percent to 6 percent, the:

Suppose the money supply is $100 billion and nominal GDP is $500 billion.What is the velocity of money?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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