Question 1

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Accepted Answer

A) the quantity of money demanded and the quantity of money supplied 
B) the quantity of money demanded but not the quantity of money supplied 
C) the quantity of money supplied but not the quantity of money demanded 
D) neither the quantity of money supplied nor the quantity of money demanded 
A) the quantity of money demanded and the quantity of money supplied 
B) the quantity of money demanded but not the quantity of money supplied 
C) the quantity of money supplied but not the quantity of money demanded 
D) neither the quantity of money supplied nor the quantity of money demanded

Question 2

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Accepted Answer

A) decrease that benefited creditors at the expense of debtors. 
B) decrease that benefited debtors at the expense of creditors. 
C) increase that benefited creditors at the expense of debtors. 
D) increase that benefited debtors at the expense of creditors. 
A) decrease that benefited creditors at the expense of debtors. 
B) decrease that benefited debtors at the expense of creditors. 
C) increase that benefited creditors at the expense of debtors. 
D) increase that benefited debtors at the expense of creditors.

Question 3

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela

Question 4

When money is neutral, which of the following increases when the money supply growth rate increases?

Accepted Answer

A) real output growth 
B) real interest rates 
C) nominal interest rates 
D) the money supply divided by the price level 
A) real output growth 
B) real interest rates 
C) nominal interest rates 
D) the money supply divided by the price level

Question 5

Nominal GDP measures output of final goods and services in physical terms.

Accepted Answer

A) True 
 B)False

Question 6

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

Accepted Answer

A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen. 
A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen.

Question 7

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 8

Shoeleather costs arise when higher inflation rates induce people to

Accepted Answer

A) spend more time looking for bargains. 
B) spend less time looking for bargains. 
C) hold more money. 
D) hold less money. 
A) spend more time looking for bargains. 
B) spend less time looking for bargains. 
C) hold more money. 
D) hold less money.

Question 9

In which of the following cases was the inflation rate 12 percent over the last year?

Accepted Answer

A) One year ago the price index had a value of 110 and now it has a value of 120. 
B) One year ago the price index had a value of 120 and now it has a value of 132. 
C) One year ago the price index had a value of 134 and now it has a value of 150. 
D) One year ago the price index had a value of 145 and now it has a value of 163. 
A) One year ago the price index had a value of 110 and now it has a value of 120. 
B) One year ago the price index had a value of 120 and now it has a value of 132. 
C) One year ago the price index had a value of 134 and now it has a value of 150. 
D) One year ago the price index had a value of 145 and now it has a value of 163.

Question 10

Refer to Figure 30-1. If the current money supply is MS1, then

Accepted Answer

A) equilibrium exists when the value of money is 2. 
B) equilibrium exists when the equilibrium is at point D. 
C) equilibrium exists when the value of money is 1. 
D) there is excess demand if the value of money is 2. 
A) equilibrium exists when the value of money is 2. 
B) equilibrium exists when the equilibrium is at point D. 
C) equilibrium exists when the value of money is 1. 
D) there is excess demand if the value of money is 2.

Question 11

The value of money falls. This might be because the Federal Reserve

Accepted Answer

A) bought bonds, which increased the money supply. 
B) bought bonds, which decreased the money supply. 
C) sold bonds, which increased the money supply. 
D) sold bonds, which decreased the money supply. 
A) bought bonds, which increased the money supply. 
B) bought bonds, which decreased the money supply. 
C) sold bonds, which increased the money supply. 
D) sold bonds, which decreased the money supply.

Question 12

Given U.S. tax laws, persistently high inflation may result in

Accepted Answer

A) ​slower economic growth because the after-tax real interest rate is lower. 
B) faster economic growth because the after-tax real interest rate is higher. 
C) ​​slower economic growth because the after-tax nominal interest rate is lower. 
D) ​​faster economic growth because the after-tax nominal interest rate is higher. 
A) ​slower economic growth because the after-tax real interest rate is lower. 
B) faster economic growth because the after-tax real interest rate is higher. 
C) ​​slower economic growth because the after-tax nominal interest rate is lower. 
D) ​​faster economic growth because the after-tax nominal interest rate is higher.

Question 13

Open-market purchases by the Fed

Accepted Answer

A) make the price level and value of money fall. 
B) make the price level rise, and make the value of money fall. 
C) make the price level and make the value of money rise. 
D) make the price level fall, and make the value of money rise. 
A) make the price level and value of money fall. 
B) make the price level rise, and make the value of money fall. 
C) make the price level and make the value of money rise. 
D) make the price level fall, and make the value of money rise.

Question 14

If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

Accepted Answer

A) 1.6 percent 
B) 10 percent 
C) 6.5 percent 
D) 1.5 percent 
A) 1.6 percent 
B) 10 percent 
C) 6.5 percent 
D) 1.5 percent

Question 15

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

Accepted Answer

A) the price level and nominal GDP 
B) the price level and real GDP 
C) only real GDP 
D) only the price level 
A) the price level and nominal GDP 
B) the price level and real GDP 
C) only real GDP 
D) only the price level

Question 16

The primary reason people hold money is

Accepted Answer

A) to keep wealth in a less liquid form. 
B) to use it as a medium of exchange. 
C) to use it for investment. 
D) to earn interest. 
A) to keep wealth in a less liquid form. 
B) to use it as a medium of exchange. 
C) to use it for investment. 
D) to earn interest.

Question 17

According to the classical dichotomy, which of the following is influenced by monetary factors?

Accepted Answer

A) nominal wages 
B) unemployment 
C) real GDP 
D) All of the above are correct. 
A) nominal wages 
B) unemployment 
C) real GDP 
D) All of the above are correct.

Question 18

If inflation is lower than what was expected,

Accepted Answer

A) creditors receive a lower real interest rate than they had anticipated. 
B) creditors pay a lower real interest rate than they had anticipated. 
C) debtors receive a higher real interest rate than they had anticipated. 
D) debtors pay a higher real interest rate than they had anticipated. 
A) creditors receive a lower real interest rate than they had anticipated. 
B) creditors pay a lower real interest rate than they had anticipated. 
C) debtors receive a higher real interest rate than they had anticipated. 
D) debtors pay a higher real interest rate than they had anticipated.

Question 19

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Accepted Answer

nominal, r

Question 20

Inflation costs are minimized under which inflation rate?

Accepted Answer

A) ​-20 percent 
B) 5 percent 
C) ​15 percent 
D) 575 percent 
A) ​-20 percent 
B) 5 percent 
C) ​15 percent 
D) 575 percent

Exam 30: Money Growth and Inflation

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

When money is neutral, which of the following increases when the money supply growth rate increases?

Nominal GDP measures output of final goods and services in physical terms.

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Shoeleather costs arise when higher inflation rates induce people to

In which of the following cases was the inflation rate 12 percent over the last year?

Refer to Figure 30-1. If the current money supply is MS1, then

The value of money falls. This might be because the Federal Reserve

Given U.S. tax laws, persistently high inflation may result in

Open-market purchases by the Fed

If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

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

The primary reason people hold money is

According to the classical dichotomy, which of the following is influenced by monetary factors?

If inflation is lower than what was expected,

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Inflation costs are minimized under which inflation rate?

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

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

Refer to Figure 30-1. If the current money supply is MS₁, then

The ___ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _ interest rate and the ___.