Question 1

When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 2

Consider the economy of Burgerland, which only produces hamburgers. ​If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Accepted Answer

A) ​2,000 
B) ​2,500 
C) ​2,750 
D) ​3,000 
A) ​2,000 
B) ​2,500 
C) ​2,750 
D) ​3,000

Question 3

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent . This difference between actual and expected inflation

Accepted Answer

A) transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected. 
B) transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected. 
C) transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected. 
D) transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected. 
A) transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected. 
B) transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected. 
C) transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected. 
D) transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.

Question 4

Serena purchased 10 shares of GLC, Inc. stock for $200 per share; one year later she sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0 to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Serena pay on her gain?

Accepted Answer

A) $90 
B) $95 
C) $100 
D) None of the above is correct. 
A) $90 
B) $95 
C) $100 
D) None of the above is correct.

Question 5

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Accepted Answer

A) $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
B) 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
C) $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
D) 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
A) $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
B) 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
C) $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
D) 8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

Question 6

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.  
-Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

Accepted Answer

A) 0.5 and the equilibrium value of money is 2. 
B) 2 and the equilibrium value of money is 0.5. 
C) 0.5 and the equilibrium value of money cannot be determined from the graph. 
D) 2 and the equilibrium value of money cannot be determined from the graph. 
A) 0.5 and the equilibrium value of money is 2. 
B) 2 and the equilibrium value of money is 0.5. 
C) 0.5 and the equilibrium value of money cannot be determined from the graph. 
D) 2 and the equilibrium value of money cannot be determined from the graph.

Question 7

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

A) real GDP. 
B) real wages. 
C) real interest rates. 
D) All of the above are correct. 
A) real GDP. 
B) real wages. 
C) real interest rates. 
D) All of the above are correct.

Question 8

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Accepted Answer

A) Y rose, V rose 
B) Y fell, V fell 
C) Y rose, V fell 
D) Y fell, V rose 
A) Y rose, V rose 
B) Y fell, V fell 
C) Y rose, V fell 
D) Y fell, V rose

Question 9

Other things the same, a decrease in velocity means that

Accepted Answer

A) the rate at which money changes hands falls, so the price level rises. 
B) the rate at which money changes hands falls, so the price level falls. 
C) the rate at which money changes hands rises, so the price level rises. 
D) the rate at which money changes hands rises, so the price level falls. 
A) the rate at which money changes hands falls, so the price level rises. 
B) the rate at which money changes hands falls, so the price level falls. 
C) the rate at which money changes hands rises, so the price level rises. 
D) the rate at which money changes hands rises, so the price level falls.

Question 10

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

Accepted Answer

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

Question 11

Which of the following is an example of the shoeleather costs of inflation?

Accepted Answer

A) ​Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy 
B) Beto sells stocks and earns a real capital gain of $50, but is taxed for the nominal capital gain of $75 
C) ​During Bolivia's hyperinflation, workers rushed to immediately convert their wages from pesos to black-market dollars 
D) The after-tax real interest rate is lower when inflation is higher 
A) ​Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy 
B) Beto sells stocks and earns a real capital gain of $50, but is taxed for the nominal capital gain of $75 
C) ​During Bolivia's hyperinflation, workers rushed to immediately convert their wages from pesos to black-market dollars 
D) The after-tax real interest rate is lower when inflation is higher

Question 12

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Accepted Answer

A) both interest income and capital gains. 
B) interest income but not capital gains. 
C) capital gains but not interest income. 
D) neither interest income nor capital gains. 
A) both interest income and capital gains. 
B) interest income but not capital gains. 
C) capital gains but not interest income. 
D) neither interest income nor capital gains.

Question 13

The idea that inflation by itself reduces people's purchasing power is called

Accepted Answer

A) the inflation tax. 
B) menu costs. 
C) the inflation fallacy. 
D) shoeleather costs. 
A) the inflation tax. 
B) menu costs. 
C) the inflation fallacy. 
D) shoeleather costs.

Question 14

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Accepted Answer

A) True 
 B)False

Question 15

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) the money supply. 
A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) the money supply.

Question 16

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 17

Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money supply growth would be associated with

Accepted Answer

A) both higher inflation and higher nominal interest rates. 
B) a higher inflation rate, but not higher nominal interest rates. 
C) a higher nominal interest rate, but not higher inflation. 
D) neither a higher inflation rate nor a higher nominal interest rate. 
A) both higher inflation and higher nominal interest rates. 
B) a higher inflation rate, but not higher nominal interest rates. 
C) a higher nominal interest rate, but not higher inflation. 
D) neither a higher inflation rate nor a higher nominal interest rate.

Question 18

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Accepted Answer

fallen, mo

Question 19

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Accepted Answer

A) the price level and velocity. 
B) the price level but not velocity. 
C) velocity but not the price level. 
D) neither the price level nor velocity. 
A) the price level and velocity. 
B) the price level but not velocity. 
C) velocity but not the price level. 
D) neither the price level nor velocity.

Question 20

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

A) the price level 
B) real GDP 
C) nominal interest rates 
D) All of the above are correct. 
A) the price level 
B) real GDP 
C) nominal interest rates 
D) All of the above are correct.

Exam 30: Money Growth and Inflation

When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Consider the economy of Burgerland, which only produces hamburgers. ​If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent . This difference between actual and expected inflation

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Other things the same, a decrease in velocity means that

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

Which of the following is an example of the shoeleather costs of inflation?

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

The idea that inflation by itself reduces people's purchasing power is called

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money supply growth would be associated with

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

According to the classical dichotomy, which of the following is not influenced by monetary factors?

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

Consider the economy of Burgerland, which only produces hamburgers. If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS₁, then the equilibrium price level is

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

When the consumer price index increases, the value of your money has _. According to the quantity theory of money this is caused by an increase in the _.