Question 1

​Which of the following is NOT correct?

Accepted Answer

A) ​In 2015, the inflation rate was 7.8 percent in the U.S. 
B) ​In 2015, the inflation rate was 84.1 percent in Venezuela 
C) ​​In 2015, the inflation rate was 4.9 percent in India 
D) ​​In 2015, the inflation rate was 1.5 percent in China. 
A) ​In 2015, the inflation rate was 7.8 percent in the U.S. 
B) ​In 2015, the inflation rate was 84.1 percent in Venezuela 
C) ​​In 2015, the inflation rate was 4.9 percent in India 
D) ​​In 2015, the inflation rate was 1.5 percent in China.

Question 2

Wealth is redistributed from creditors to debtors when inflation is

Accepted Answer

A) high, whether it is expected or not. 
B) low, whether it is expected or not. 
C) unexpectedly high. 
D) unexpectedly low. 
A) high, whether it is expected or not. 
B) low, whether it is expected or not. 
C) unexpectedly high. 
D) unexpectedly low.

Question 3

When prices are falling, economists say that there is

Accepted Answer

A) disinflation. 
B) deflation. 
C) a contraction. 
D) an inverted inflation. 
A) disinflation. 
B) deflation. 
C) a contraction. 
D) an inverted inflation.

Question 4

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

Accepted Answer

Open marke

Question 5

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached

Accepted Answer

A) 60 percent. 
B) 80 percent. 
C) 220 percent. 
D) 24,000 percent. 
A) 60 percent. 
B) 80 percent. 
C) 220 percent. 
D) 24,000 percent.

Question 6

According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then

Accepted Answer

A) both the price level and nominal GDP would rise by 5 percent. 
B) the price level would rise by 5 percent and nominal GDP would be unchanged. 
C) the price level would be unchanged and nominal GDP would rise by 5 percent. 
D) both the price level and nominal GDP would be unchanged. 
A) both the price level and nominal GDP would rise by 5 percent. 
B) the price level would rise by 5 percent and nominal GDP would be unchanged. 
C) the price level would be unchanged and nominal GDP would rise by 5 percent. 
D) both the price level and nominal GDP would be unchanged.

Question 7

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money

Accepted Answer

A) and equilibrium quantity of money to increase. 
B) and equilibrium quantity of money to decrease. 
C) to increase, while the equilibrium quantity of money decreases. 
D) to decrease, while the equilibrium quantity of money increases. 
A) and equilibrium quantity of money to increase. 
B) and equilibrium quantity of money to decrease. 
C) to increase, while the equilibrium quantity of money decreases. 
D) to decrease, while the equilibrium quantity of money increases.

Question 8

With the value of money on the vertical axis, the money supply curve is

Accepted Answer

A) upward sloping because people supply a larger quantity of money when the value of money increases. 
B) downward sloping because people supply a larger quantity of money when the value of money decreases. 
C) horizontal because we assume the central bank controls the money supply 
D) vertical because we assume the central bank controls the money supply. 
A) upward sloping because people supply a larger quantity of money when the value of money increases. 
B) downward sloping because people supply a larger quantity of money when the value of money decreases. 
C) horizontal because we assume the central bank controls the money supply 
D) vertical because we assume the central bank controls the money supply.

Question 9

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Accepted Answer

A) True 
 B)False

Question 10

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

Accepted Answer

The Fisher effect says that increases in

Question 11

You put money into an account and earn a real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of interest?

Accepted Answer

A) 5.25 percent 
B) 3.05 percent 
C) 2.55 percent 
D) 1.25 percent 
A) 5.25 percent 
B) 3.05 percent 
C) 2.55 percent 
D) 1.25 percent

Question 12

Define each of the symbols and explain the meaning of M   
V = P   
Y.

Accepted Answer

M is the quantity of money, V is the vel

Question 13

When inflation rises, firms make

Accepted Answer

A) more frequent price changes. This raises their menu costs. 
B) more frequent price changes. This reduces their menu costs. 
C) less frequent price changes. This raises their menu costs. 
D) less frequent price changes. This reduces their menu costs. 
A) more frequent price changes. This raises their menu costs. 
B) more frequent price changes. This reduces their menu costs. 
C) less frequent price changes. This raises their menu costs. 
D) less frequent price changes. This reduces their menu costs.

Question 14

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

Accepted Answer

A) 135 
B) 132 
C) 125 
D) 121 
A) 135 
B) 132 
C) 125 
D) 121

Question 15

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

Accepted Answer

A) the money supply and the price level increase. 
B) the money supply and the price level decrease. 
C) the money supply increases and the price level decreases. 
D) the money supply increases and the price level increases. 
A) the money supply and the price level increase. 
B) the money supply and the price level decrease. 
C) the money supply increases and the price level decreases. 
D) the money supply increases and the price level increases.

Question 16

Norma receives an increase in her nominal income. She complains that the current inflation rate of six percent erodes the real purchasing power of her additional nominal income. This is true

Accepted Answer

A) only if the increase in her nominal income is less than six percent. 
B) only if the increase in her nominal income is more than six percent. 
C) since inflation always reduces purchasing power. 
D) only if her real income increases. 
A) only if the increase in her nominal income is less than six percent. 
B) only if the increase in her nominal income is more than six percent. 
C) since inflation always reduces purchasing power. 
D) only if her real income increases.

Question 17

When deciding how much to save, people care most about

Accepted Answer

A) after-tax nominal interest rates. 
B) after-tax real interest rates. 
C) before-tax real interest rates. 
D) before-tax nominal interest rates. 
A) after-tax nominal interest rates. 
B) after-tax real interest rates. 
C) before-tax real interest rates. 
D) before-tax nominal interest rates.

Question 18

The costs a business incurs to change its prices are called ___________.

Accepted Answer

The answer of The costs a business incurs to change...

Question 19

The classical dichotomy refers to the idea that the supply of money

Accepted Answer

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

Question 20

In the long run, money demand and money supply determine

Accepted Answer

A) the price level and the real interest rate. 
B) the price level but not the real interest rate. 
C) the real interest rate but not the price level. 
D) neither the price level nor the real interest rate. 
A) the price level and the real interest rate. 
B) the price level but not the real interest rate. 
C) the real interest rate but not the price level. 
D) neither the price level nor the real interest rate.

Exam 30: Money Growth and Inflation

​Which of the following is NOT correct?

Wealth is redistributed from creditors to debtors when inflation is

When prices are falling, economists say that there is

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached

According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money

With the value of money on the vertical axis, the money supply curve is

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

You put money into an account and earn a real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of interest?

Define each of the symbols and explain the meaning of M V = P Y.

When inflation rises, firms make

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

Norma receives an increase in her nominal income. She complains that the current inflation rate of six percent erodes the real purchasing power of her additional nominal income. This is true

When deciding how much to save, people care most about

The costs a business incurs to change its prices are called ___________.

The classical dichotomy refers to the idea that the supply of money

In the long run, money demand and money supply determine

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Which of the following is NOT correct?