Question 1

Indexing the tax system to take into account the effects of inflation would by itself

Accepted Answer

A) mean that only real interest earnings are taxed. 
B) mean an end to taxing capital gains. 
C) mean an increase in average tax rates. 
D) All of the above are correct. 
A) mean that only real interest earnings are taxed. 
B) mean an end to taxing capital gains. 
C) mean an increase in average tax rates. 
D) All of the above are correct.

Question 2

If Y and V are constant and M doubles, the quantity equation implies that the price level

Accepted Answer

A) more than doubles. 
B) changes but less than doubles. 
C) doubles. 
D) does not change 
A) more than doubles. 
B) changes but less than doubles. 
C) doubles. 
D) does not change

Question 3

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

Accepted Answer

When the money supply increases, there i

Question 4

The inflation tax falls mostly heavily on

Accepted Answer

A) those who hold a lot of currency and accounts for a large share of U.S. government revenue. 
B) those who hold a lot of currency but accounts for a small share of U.S. government revenue. 
C) those who hold little currency and accounts for a large share of U.S. government revenue. 
D) those who hold little currency but accounts for a small share of U.S. government revenue. 
A) those who hold a lot of currency and accounts for a large share of U.S. government revenue. 
B) those who hold a lot of currency but accounts for a small share of U.S. government revenue. 
C) those who hold little currency and accounts for a large share of U.S. government revenue. 
D) those who hold little currency but accounts for a small share of U.S. government revenue.

Question 5

Consider the money market drawn with the value of money on the vertical axis. If money demand is unchanged and the price level rises, then

Accepted Answer

A) the money supply must have increased, perhaps because the Fed bought bonds. 
B) the money supply must have increased, perhaps because the Fed sold bonds. 
C) the money supply must have decreased, perhaps because the Fed bought bonds. 
D) the money supply must have decreased, perhaps because the Fed sold bonds. 
A) the money supply must have increased, perhaps because the Fed bought bonds. 
B) the money supply must have increased, perhaps because the Fed sold bonds. 
C) the money supply must have decreased, perhaps because the Fed bought bonds. 
D) the money supply must have decreased, perhaps because the Fed sold bonds.

Question 6

Which of the following statements about U.S. inflation is not correct?

Accepted Answer

A) Low inflation was viewed as a triumph of President Carter's economic policy. 
B) There were long periods in the nineteenth century during which prices fell. 
C) The U.S. public has viewed inflation rates of even 7 percent as a major economic problem. 
D) The U.S. inflation rate has varied over time, but international data show even more variation. 
A) Low inflation was viewed as a triumph of President Carter's economic policy. 
B) There were long periods in the nineteenth century during which prices fell. 
C) The U.S. public has viewed inflation rates of even 7 percent as a major economic problem. 
D) The U.S. inflation rate has varied over time, but international data show even more variation.

Question 7

Which of the following can a country increase in the long run by increasing its money growth rate?

Accepted Answer

A) the nominal wage. 
B) real output. 
C) real interest rates. 
D) the real wage. 
A) the nominal wage. 
B) real output. 
C) real interest rates. 
D) the real wage.

Question 8

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before-tax real capital gain?

Accepted Answer

A) $1,300 - $1,000(1.05) and this is the gain he is to report on his income tax 
B) $1,300 - $1,000(1.05) but he is to report a $300 gain on his income tax 
C) $1,300 - $1,000(1.07) and this is the gain he is to report on his income tax 
D) $1,300 - $1,000(1.07) but he is to report a $300 gain on his income tax 
A) $1,300 - $1,000(1.05) and this is the gain he is to report on his income tax 
B) $1,300 - $1,000(1.05) but he is to report a $300 gain on his income tax 
C) $1,300 - $1,000(1.07) and this is the gain he is to report on his income tax 
D) $1,300 - $1,000(1.07) but he is to report a $300 gain on his income tax

Question 9

When the money market is drawn with the value of money on the vertical axis, the price level increases if

Accepted Answer

A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right. 
A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right.

Question 10

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Accepted Answer

The answer of The nominal interest rate is eight percent...

Question 11

Interest rates adjusted for the effects of inflation

Accepted Answer

A) and inflation are nominal variables. 
B) and inflation are real variables. 
C) are real variables; inflation is a nominal variable. 
D) are nominal variables; inflation is a real variable. 
A) and inflation are nominal variables. 
B) and inflation are real variables. 
C) are real variables; inflation is a nominal variable. 
D) are nominal variables; inflation is a real variable.

Question 12

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Accepted Answer

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

Question 13

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Accepted Answer

A) 5.25 percent 
B) 5 percent 
C) 2.3 percent 
D) 2 percent 
A) 5.25 percent 
B) 5 percent 
C) 2.3 percent 
D) 2 percent

Question 14

If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.

Accepted Answer

A) True 
 B)False

Question 15

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 16

When the Consumer Price Index falls from 110 to 100

Accepted Answer

A) there is inflation of 9.1% and the value of money decreases. 
B) there is deflation of 9.1% and the value of money increases. 
C) there is deflation of 10% and the value of money increases. 
D) there is inflation of 10% and the value of money decreases. 
A) there is inflation of 9.1% and the value of money decreases. 
B) there is deflation of 9.1% and the value of money increases. 
C) there is deflation of 10% and the value of money increases. 
D) there is inflation of 10% and the value of money decreases.

Question 17

In United States history there were long periods when most prices fell.

Accepted Answer

A) True 
 B)False

Question 18

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

Accepted Answer

A) Austria in the 1920's. 
B) Hungary in the 1920's. 
C) Poland in the 1920's. 
D) All of the above are correct. 
A) Austria in the 1920's. 
B) Hungary in the 1920's. 
C) Poland in the 1920's. 
D) All of the above are correct.

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Accepted Answer

Inflation has raised the general price l

Exam 30: Money Growth and Inflation

Indexing the tax system to take into account the effects of inflation would by itself

If Y and V are constant and M doubles, the quantity equation implies that the price level

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

The inflation tax falls mostly heavily on

Consider the money market drawn with the value of money on the vertical axis. If money demand is unchanged and the price level rises, then

Which of the following statements about U.S. inflation is not correct?

Which of the following can a country increase in the long run by increasing its money growth rate?

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before-tax real capital gain?

When the money market is drawn with the value of money on the vertical axis, the price level increases if

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Interest rates adjusted for the effects of inflation

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.

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.

When the Consumer Price Index falls from 110 to 100

In United States history there were long periods when most prices fell.

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

The source of all four classic hyperinflations was high rates of money growth.

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

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