Question 1

When the money market is drawn with the value of money on the vertical axis, the price level decreases 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 2

The term hyperinflation refers to

Accepted Answer

A) the spread of inflation from one country to others. 
B) a decrease in the inflation rate. 
C) a period of very high inflation. 
D) inflation accompanied by a recession. 
A) the spread of inflation from one country to others. 
B) a decrease in the inflation rate. 
C) a period of very high inflation. 
D) inflation accompanied by a recession.

Question 3

Wealth is redistributed from debtors to creditors 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 4

According to the classical dichotomy, what changes nominal variables? What changes real variables?

Accepted Answer

The classical dichotomy argues that nomi

Question 5

The money demand curve shifts to the left when the Fed buys government bonds.

Accepted Answer

A) True 
 B)False

Question 6

Explain how inflation affects savings.

Accepted Answer

Inflation discourages savings. Income ta

Question 7

The classical dichotomy argues that changes in the money supply

Accepted Answer

A) affect both nominal and real variables. 
B) affect neither nominal nor real variables. 
C) affect nominal variables, but not real variables. 
D) do not affect nominal variables, but do affect real variables. 
A) affect both nominal and real variables. 
B) affect neither nominal nor real variables. 
C) affect nominal variables, but not real variables. 
D) do not affect nominal variables, but do affect real variables.

Question 8

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

Question 9

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Accepted Answer

A) True 
 B)False

Question 10

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Accepted Answer

The value

Question 11

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

Accepted Answer

A) increases the price level by more than 4 percent. 
B) increases the price level by 4 percent. 
C) increases the price level by less than 4 percent. 
D) increases real GDP by 4 percent. 
A) increases the price level by more than 4 percent. 
B) increases the price level by 4 percent. 
C) increases the price level by less than 4 percent. 
D) increases real GDP by 4 percent.

Question 12

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

Accepted Answer

A) the real interest rate 
B) real GDP 
C) the real wage 
D) the nominal wage. 
A) the real interest rate 
B) real GDP 
C) the real wage 
D) the nominal wage.

Question 13

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

Accepted Answer

A) raised both the price level and the value of gold in Cairo. 
B) raised the price level, but decreased the value of gold in Cairo. 
C) lowered the price level, but increased the value of gold in Cairo. 
D) lowered both the price level and the value of gold in Cairo. 
A) raised both the price level and the value of gold in Cairo. 
B) raised the price level, but decreased the value of gold in Cairo. 
C) lowered the price level, but increased the value of gold in Cairo. 
D) lowered both the price level and the value of gold in Cairo.

Question 14

The inflation tax

Accepted Answer

A) transfers wealth from the government to households. 
B) is the increase in real income taxes due to lack of indexation in income tax rules. 
C) is a tax on everyone who holds money. 
D) All of the above are correct. 
A) transfers wealth from the government to households. 
B) is the increase in real income taxes due to lack of indexation in income tax rules. 
C) is a tax on everyone who holds money. 
D) All of the above are correct.

Question 15

If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

Accepted Answer

A) True 
 B)False

Question 16

When the money market is drawn with the value of money on the vertical axis, the money demand curve slopes

Accepted Answer

A) upward, because at higher prices people want to hold more money. 
B) downward, because at higher prices people want to hold more money. 
C) downward, because at higher price people want to hold less money. 
D) upward, because at higher prices people want to hold less money. 
A) upward, because at higher prices people want to hold more money. 
B) downward, because at higher prices people want to hold more money. 
C) downward, because at higher price people want to hold less money. 
D) upward, because at higher prices people want to hold less money.

Question 17

Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess?

Accepted Answer

A) The country has high money supply growth. 
B) Inflation is acting like a tax on everyone who holds money. 
C) The government is printing money to finance its expenditures. 
D) All of the above are correct. 
A) The country has high money supply growth. 
B) Inflation is acting like a tax on everyone who holds money. 
C) The government is printing money to finance its expenditures. 
D) All of the above are correct.

Question 18

An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.

Accepted Answer

A) His real and nominal salary have risen. 
B) His real and nominal salary have fallen. 
C) His real salary has risen and his nominal salary has fallen. 
D) His real salary has fallen and his nominal salary has risen. 
A) His real and nominal salary have risen. 
B) His real and nominal salary have fallen. 
C) His real salary has risen and his nominal salary has fallen. 
D) His real salary has fallen and his nominal salary has risen.

Question 19

Which country is correctly matched with its 2015 inflation rate?

Accepted Answer

A) 9 percent inflation in the United States. 
B) 3.6 percent inflation in Russia. 
C) 59 percent inflation in Venezuela. 
D) 4.9 percent inflation in India. 
A) 9 percent inflation in the United States. 
B) 3.6 percent inflation in Russia. 
C) 59 percent inflation in Venezuela. 
D) 4.9 percent inflation in India.

Question 20

Velocity is

Accepted Answer

A) Y/(M x P) and increases if dollars are exchanged less frequently. 
B) Y/(M x P) and increases if dollars are exchanged more frequently. 
C) (P x Y)/M and increases if dollars are exchanged less frequently. 
D) (P x Y)/M and increases if dollars are exchanged more frequently. 
A) Y/(M x P) and increases if dollars are exchanged less frequently. 
B) Y/(M x P) and increases if dollars are exchanged more frequently. 
C) (P x Y)/M and increases if dollars are exchanged less frequently. 
D) (P x Y)/M and increases if dollars are exchanged more frequently.

Exam 30: Money Growth and Inflation

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

The term hyperinflation refers to

Wealth is redistributed from debtors to creditors when inflation is

According to the classical dichotomy, what changes nominal variables? What changes real variables?

The money demand curve shifts to the left when the Fed buys government bonds.

Explain how inflation affects savings.

The classical dichotomy argues that changes in the money supply

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

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

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

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

The inflation tax

If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

When the money market is drawn with the value of money on the vertical axis, the money demand curve slopes

Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess?

An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.

Which country is correctly matched with its 2015 inflation rate?

Velocity is

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

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