Question 1

Who loses when there is unexpected deflation?

Accepted Answer

A)  nominal-asset holders 
B)  borrowers 
C)  lenders 
D)  nominal-asset holders, borrowers, and lenders 
A)  nominal-asset holders 
B)  borrowers 
C)  lenders 
D)  nominal-asset holders, borrowers, and lenders

Question 2

The Fed monetizes the debt when it:

Accepted Answer

A)  prints money and buys government debt from the public. 
B)  sells bonds. 
C)  decreases the money supply. 
D)  targets interest rates. 
A)  prints money and buys government debt from the public. 
B)  sells bonds. 
C)  decreases the money supply. 
D)  targets interest rates.

Question 3

A Phillips curve implies a negative relationship between:

Accepted Answer

A)  consumption and saving. 
B)  inflation and prices. 
C)  inflation and unemployment. 
D)  consumption and inflation. 
A)  consumption and saving. 
B)  inflation and prices. 
C)  inflation and unemployment. 
D)  consumption and inflation.

Question 4

Use the following to answer questions:  
-(Figure: AD-AS Model and the Short-Run Phillips Curve) Refer to Figure: AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD1 to AD2, then real GDP will increase by:

Accepted Answer

A)  zero. 
B)  2%. 
C)  4%. 
D)  6%. 
A)  zero. 
B)  2%. 
C)  4%. 
D)  6%.

Question 5

Use the following to answer question 132:  
-(Table: Combinations of Unemployment and Inflation) Refer to Table: Combinations of Unemployment and Inflation. Which combination could lie on the same long-run Phillips curve?

Accepted Answer

A)  W and Z 
B)  W and Y 
C)  X and Z 
D)  X and Y 
A)  W and Z 
B)  W and Y 
C)  X and Z 
D)  X and Y

Question 6

The classical model of the price level is more accurate during low inflation than high inflation.

Accepted Answer

A) True 
 B)False

Question 7

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____.

Accepted Answer

A)  money is neutral in the long run; do not consider money to be neutral in the long run. 
B)  the adjustment of prices takes some time; expect changes in the money supply to be instantaneous. 
C)  did not consider money to be neutral in the long run; consider money neutral in the long run. 
D)  the adjustment of prices to changes in the money supply is instantaneous; argue that this adjustment process takes some time. 
A)  money is neutral in the long run; do not consider money to be neutral in the long run. 
B)  the adjustment of prices takes some time; expect changes in the money supply to be instantaneous. 
C)  did not consider money to be neutral in the long run; consider money neutral in the long run. 
D)  the adjustment of prices to changes in the money supply is instantaneous; argue that this adjustment process takes some time.

Question 8

Seignorage refers to the:

Accepted Answer

A)  problems faced by Social Security as the population ages. 
B)  government's right to print money. 
C)  problems senior citizens face in retirement. 
D)  problems created when the government prints too much money. 
A)  problems faced by Social Security as the population ages. 
B)  government's right to print money. 
C)  problems senior citizens face in retirement. 
D)  problems created when the government prints too much money.

Question 9

The cost of disinflation is the:

Accepted Answer

A)  leftward shift in aggregate supply. 
B)  decrease in prices. 
C)  loss of real GDP in the process. 
D)  loss of international markets when prices change. 
A)  leftward shift in aggregate supply. 
B)  decrease in prices. 
C)  loss of real GDP in the process. 
D)  loss of international markets when prices change.

Question 10

Each point on a Phillips curve is a different combination of:

Accepted Answer

A)  price and quantity. 
B)  inflation and unemployment. 
C)  the interest rate and investment. 
D)  saving and disposable income. 
A)  price and quantity. 
B)  inflation and unemployment. 
C)  the interest rate and investment. 
D)  saving and disposable income.

Question 11

Use the following to answer questions:  
-(Figure: Actual and Natural Rates of Unemployment) Refer to Figure 16-4: Actual and Natural Rates of Unemployment. In 1982, the actual unemployment rate was approximately:

Accepted Answer

A)  zero. 
B)  4%. 
C)  6%. 
D)  10%. 
A)  zero. 
B)  4%. 
C)  6%. 
D)  10%.

Question 12

Liquidity traps are most likely to occur when the:

Accepted Answer

A)  economy is going through a recovery. 
B)  economy is expanding rapidly. 
C)  public expects inflation. 
D)  public expects deflation. 
A)  economy is going through a recovery. 
B)  economy is expanding rapidly. 
C)  public expects inflation. 
D)  public expects deflation.

Question 13

If the real money supply is $500 billion and the money supply grows by 2%, then real seignorage is:

Accepted Answer

A)  $25 trillion. 
B)  $1 trillion. 
C)  $10 billion. 
D)  $1 billion. 
A)  $25 trillion. 
B)  $1 trillion. 
C)  $10 billion. 
D)  $1 billion.

Question 14

In a liquidity trap:

Accepted Answer

A)  using expansionary monetary policy is not effective because the real interest rate is negative. 
B)  aggregate demand falls because consumers do not have enough liquidity to consume. 
C)  using expansionary monetary policy is not effective because the nominal interest rate is irreducible. 
D)  lenders are trapped by large loans with declining rates of return. 
A)  using expansionary monetary policy is not effective because the real interest rate is negative. 
B)  aggregate demand falls because consumers do not have enough liquidity to consume. 
C)  using expansionary monetary policy is not effective because the nominal interest rate is irreducible. 
D)  lenders are trapped by large loans with declining rates of return.

Question 15

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

Accepted Answer

A)  permanent increase 
B)  permanent decrease 
C)  temporary increase 
D)  temporary decrease 
A)  permanent increase 
B)  permanent decrease 
C)  temporary increase 
D)  temporary decrease

Question 16

If there is too much deflation:

Accepted Answer

A)  people will switch from money to real assets. 
B)  the nominal interest rate will be constrained by the zero interest rate bound. 
C)  lenders will be harmed. 
D)  aggregate demand will increase. 
A)  people will switch from money to real assets. 
B)  the nominal interest rate will be constrained by the zero interest rate bound. 
C)  lenders will be harmed. 
D)  aggregate demand will increase.

Question 17

Inflation does NOT reduce purchasing power if:

Accepted Answer

A)  prices of essential products, such as food and gasoline, don't increase too much. 
B)  nominal wages rise at the same rate as prices. 
C)  it remains under 10% per year. 
D)  the Federal Reserve increases the money supply enough to offset it. 
A)  prices of essential products, such as food and gasoline, don't increase too much. 
B)  nominal wages rise at the same rate as prices. 
C)  it remains under 10% per year. 
D)  the Federal Reserve increases the money supply enough to offset it.

Question 18

If there has been an upward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

Accepted Answer

A)  SRAS; left 
B)  SRAS; right 
C)  AD; left 
D)  AD; right 
A)  SRAS; left 
B)  SRAS; right 
C)  AD; left 
D)  AD; right

Question 19

An increase in the expected rate of inflation:

Accepted Answer

A)  shifts the short-run Phillips curve down. 
B)  shifts the short-run Phillips curve up. 
C)  moves the economy along the short-run Phillips curve to higher rates of inflation. 
D)  moves the economy along the short-run Phillips curve to higher rates on unemployment. 
A)  shifts the short-run Phillips curve down. 
B)  shifts the short-run Phillips curve up. 
C)  moves the economy along the short-run Phillips curve to higher rates of inflation. 
D)  moves the economy along the short-run Phillips curve to higher rates on unemployment.

Question 20

Real seignorage is calculated by the:

Accepted Answer

A)  real interest rate times the money supply. 
B)  rate of growth of the money supply times the real money supply. 
C)  real interest rate minus the inflation rate. 
D)  rate of growth of the money supply divided by the price index. 
A)  real interest rate times the money supply. 
B)  rate of growth of the money supply times the real money supply. 
C)  real interest rate minus the inflation rate. 
D)  rate of growth of the money supply divided by the price index.

Who loses when there is unexpected deflation?

The Fed monetizes the debt when it:

A Phillips curve implies a negative relationship between:

Use the following to answer questions: -(Figure: AD-AS Model and the Short-Run Phillips Curve) Refer to Figure: AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD₁ to AD₂, then real GDP will increase by:

Use the following to answer question 132: -(Table: Combinations of Unemployment and Inflation) Refer to Table: Combinations of Unemployment and Inflation. Which combination could lie on the same long-run Phillips curve?

The classical model of the price level is more accurate during low inflation than high inflation.

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _, while today's economists _.

Seignorage refers to the:

The cost of disinflation is the:

Each point on a Phillips curve is a different combination of:

Use the following to answer questions: -(Figure: Actual and Natural Rates of Unemployment) Refer to Figure 16-4: Actual and Natural Rates of Unemployment. In 1982, the actual unemployment rate was approximately:

Liquidity traps are most likely to occur when the:

If the real money supply is $500 billion and the money supply grows by 2%, then real seignorage is:

In a liquidity trap:

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

If there is too much deflation:

Inflation does NOT reduce purchasing power if:

If there has been an upward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.

An increase in the expected rate of inflation:

Real seignorage is calculated by the:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 16: Inflation, Disinflation, and Deflation

Who loses when there is unexpected deflation?

The Fed monetizes the debt when it:

A Phillips curve implies a negative relationship between:

Use the following to answer questions: -(Figure: AD-AS Model and the Short-Run Phillips Curve) Refer to Figure: AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD1 to AD2, then real GDP will increase by:

Use the following to answer question 132: -(Table: Combinations of Unemployment and Inflation) Refer to Table: Combinations of Unemployment and Inflation. Which combination could lie on the same long-run Phillips curve?

The classical model of the price level is more accurate during low inflation than high inflation.

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____.

Seignorage refers to the:

The cost of disinflation is the:

Each point on a Phillips curve is a different combination of:

Use the following to answer questions: -(Figure: Actual and Natural Rates of Unemployment) Refer to Figure 16-4: Actual and Natural Rates of Unemployment. In 1982, the actual unemployment rate was approximately:

Liquidity traps are most likely to occur when the:

If the real money supply is $500 billion and the money supply grows by 2%, then real seignorage is:

In a liquidity trap:

Analysis of the Phillips curve reveals that a _____ in unemployment, like that of the early 1980s, is needed to break the cycle of inflationary expectations.

If there is too much deflation:

Inflation does NOT reduce purchasing power if:

If there has been an upward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

An increase in the expected rate of inflation:

Real seignorage is calculated by the:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Use the following to answer questions: -(Figure: AD-AS Model and the Short-Run Phillips Curve) Refer to Figure: AD-AS Model and the Short-Run Phillips Curve. If the central bank increases the money supply so that aggregate demand shifts from AD₁ to AD₂, then real GDP will increase by:

The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _, while today's economists _.

If there has been an upward movement along the fixed short-run Phillips curve, the _ curve has shifted to the _.