Question 1

If the interest rate is 5% and the inflation rate is 3%, then the real rate of return on money is:

Accepted Answer

A) 2%. 
B) 3% 
C) -3% 
D) zero. 
A) 2%. 
B) 3% 
C) -3% 
D) zero. C

Question 2

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate decreases to 2%, then we would expect the inflation rate to be:

Accepted Answer

A) 8%. 
B) 7%. 
C) 5%. 
D) 2%. 
A) 8%. 
B) 7%. 
C) 5%. 
D) 2%. D

Question 3

After allowing for inflation expectations why does real money demand still depend on the nominal rate of interest?

Accepted Answer

The real return on interest earning assets is r which equals i -   . The real return on money is -   . Money demand then depends on the difference between the real return on assets and the real return on money, i =   - (-   ) which equals i. Thus money demand continues to be negatively related to the nominal rate of interest.

Question 4

An increase in the money growth rate affects household consumption, C.

Accepted Answer

A) True 
 B)False

Question 5

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 2%, then we would expect the nominal interest rate to be:

Accepted Answer

A) 4%. 
B) 7%. 
C) 5%. 
D) 2%. 
A) 4%. 
B) 7%. 
C) 5%. 
D) 2%.

Question 6

If the interest rate is 6% and the inflation rate is 2%, then the real rate of return on money is:

Accepted Answer

A) 2%. 
B) 4% 
C) -2% 
D) zero. 
A) 2%. 
B) 4% 
C) -2% 
D) zero.

Question 7

If the expected inflation rate is 5% and the actual inflation rate is 4%, then the unexpected inflation rate is:

Accepted Answer

A) 1%. 
B) 9%. 
C) -1%. 
D) 1.25%. 
A) 1%. 
B) 9%. 
C) -1%. 
D) 1.25%.

Question 8

If the interest rate is 5% and the inflation rate is 3%, then the nominal rate of return on money is:

Accepted Answer

A) 2%. 
B) 3% 
C) 5% 
D) zero. 
A) 2%. 
B) 3% 
C) 5% 
D) zero.

Question 9

If the nominal interest rate is 2% and the actual inflation rate is 5%, then the actual real rate of interest is:

Accepted Answer

A) 7%. 
B) 3% 
C) 2.5%. 
D) -3%. 
A) 7%. 
B) 3% 
C) 2.5%. 
D) -3%.

Question 10

If the price level last year was 110 and this year is 118, then the inflation rate between last period and this period was:

Accepted Answer

A) 7.3%. 
B) 7%. 
C) 8% 
D) 6.8%. 
A) 7.3%. 
B) 7%. 
C) 8% 
D) 6.8%.

Question 11

If the expected inflation rate is 3% and the unexpected inflation rate is -2%, then the actual inflation rate is:

Accepted Answer

A) 2%. 
B) 1%. 
C) -2%. 
D) 1.67%. 
A) 2%. 
B) 1%. 
C) -2%. 
D) 1.67%.

Question 12

Derive the relationship between nominal and real interest rates.

Accepted Answer

The nominal rate of growth of assets is:

Question 13

If the interest rate is 6% and the inflation rate is 2%, then the nominal rate of return on money is:

Accepted Answer

A) 2%. 
B) 4% 
C) 8% 
D) zero. 
A) 2%. 
B) 4% 
C) 8% 
D) zero.

Question 14

The growth rate of real money balances is:

Accepted Answer

A) the growth rate of nominal money less the inflation rate. 
B) the growth rate of nominal money divided by the inflation rate. 
C) the growth rate of nominal money plus the inflation rate. 
D) the inflation rate divided by the growth rate of nominal money. 
A) the growth rate of nominal money less the inflation rate. 
B) the growth rate of nominal money divided by the inflation rate. 
C) the growth rate of nominal money plus the inflation rate. 
D) the inflation rate divided by the growth rate of nominal money.

Question 15

The data on countries around the world show that:

Accepted Answer

A) the inflation rate is positively related to the growth of currency. 
B) the inflation rate is unrelated to the growth in currency. 
C) the inflation rate is inversely related to the growth of currency. 
D) countries with high currency growth rates have higher real GDP. 
A) the inflation rate is positively related to the growth of currency. 
B) the inflation rate is unrelated to the growth in currency. 
C) the inflation rate is inversely related to the growth of currency. 
D) countries with high currency growth rates have higher real GDP.

Question 16

An increase in the money growth rate in the market clearing model causes:

Accepted Answer

A) an increase in the nominal interest rate. 
B) a decrease in money demand. 
C) an increase in the inflation rate. 
D) all of the above. 
A) an increase in the nominal interest rate. 
B) a decrease in money demand. 
C) an increase in the inflation rate. 
D) all of the above.

Question 17

If the inflation rate is 2% and the nominal interest rate is 4% and the money growth rate increases to 5%, then we would expect the inflation rate to be:

Accepted Answer

A) 6%. 
B) 7%. 
C) 5%. 
D) 2%. 
A) 6%. 
B) 7%. 
C) 5%. 
D) 2%.

Question 18

An increase in the money growth rate in the market clearing model causes:

Accepted Answer

A) a decrease in the nominal interest rate. 
B) an increase in consumption. 
C) an increase in the price level. 
D) all of the above. 
A) a decrease in the nominal interest rate. 
B) an increase in consumption. 
C) an increase in the price level. 
D) all of the above.

Question 19

What advantages are there to modeling money growth as lump-sum transfers?

Accepted Answer

Lump-sum transfers mean that the amount

Question 20

The unexpected inflation rate is:

Accepted Answer

A) the expected inflation rate less the actual inflation rate. 
B) the expected inflation rate divided by the actual inflation rate. 
C) the actual inflation rate less the expected inflation rate. 
D) the actual inflation rate divided by the expected inflation rate. 
A) the expected inflation rate less the actual inflation rate. 
B) the expected inflation rate divided by the actual inflation rate. 
C) the actual inflation rate less the expected inflation rate. 
D) the actual inflation rate divided by the expected inflation rate.

If the interest rate is 5% and the inflation rate is 3%, then the real rate of return on money is:

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate decreases to 2%, then we would expect the inflation rate to be:

After allowing for inflation expectations why does real money demand still depend on the nominal rate of interest?

An increase in the money growth rate affects household consumption, C.

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 2%, then we would expect the nominal interest rate to be:

If the interest rate is 6% and the inflation rate is 2%, then the real rate of return on money is:

If the expected inflation rate is 5% and the actual inflation rate is 4%, then the unexpected inflation rate is:

If the interest rate is 5% and the inflation rate is 3%, then the nominal rate of return on money is:

If the nominal interest rate is 2% and the actual inflation rate is 5%, then the actual real rate of interest is:

If the price level last year was 110 and this year is 118, then the inflation rate between last period and this period was:

If the expected inflation rate is 3% and the unexpected inflation rate is -2%, then the actual inflation rate is:

Derive the relationship between nominal and real interest rates.

If the interest rate is 6% and the inflation rate is 2%, then the nominal rate of return on money is:

The growth rate of real money balances is:

The data on countries around the world show that:

An increase in the money growth rate in the market clearing model causes:

If the inflation rate is 2% and the nominal interest rate is 4% and the money growth rate increases to 5%, then we would expect the inflation rate to be:

An increase in the money growth rate in the market clearing model causes:

What advantages are there to modeling money growth as lump-sum transfers?

The unexpected inflation rate is:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters

Exam 12: Inflation, Money Growth, and Interest Rates

If the interest rate is 5% and the inflation rate is 3%, then the real rate of return on money is:

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate decreases to 2%, then we would expect the inflation rate to be:

After allowing for inflation expectations why does real money demand still depend on the nominal rate of interest?

An increase in the money growth rate affects household consumption, C.

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 2%, then we would expect the nominal interest rate to be:

If the interest rate is 6% and the inflation rate is 2%, then the real rate of return on money is:

If the expected inflation rate is 5% and the actual inflation rate is 4%, then the unexpected inflation rate is:

If the interest rate is 5% and the inflation rate is 3%, then the nominal rate of return on money is:

If the nominal interest rate is 2% and the actual inflation rate is 5%, then the actual real rate of interest is:

If the price level last year was 110 and this year is 118, then the inflation rate between last period and this period was:

If the expected inflation rate is 3% and the unexpected inflation rate is -2%, then the actual inflation rate is:

Derive the relationship between nominal and real interest rates.

If the interest rate is 6% and the inflation rate is 2%, then the nominal rate of return on money is:

The growth rate of real money balances is:

The data on countries around the world show that:

An increase in the money growth rate in the market clearing model causes:

If the inflation rate is 2% and the nominal interest rate is 4% and the money growth rate increases to 5%, then we would expect the inflation rate to be:

An increase in the money growth rate in the market clearing model causes:

What advantages are there to modeling money growth as lump-sum transfers?

The unexpected inflation rate is:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters