Question 1

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 2

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate raises.

Accepted Answer

A) the inflation rate and growth of real GDP. 
B) the inflation rate but not the growth rate of real GDP. 
C) the growth rate of real GDP, but not the inflation rate. 
D) neither the inflation rate nor the growth rate of real GDP. 
A) the inflation rate and growth of real GDP. 
B) the inflation rate but not the growth rate of real GDP. 
C) the growth rate of real GDP, but not the inflation rate. 
D) neither the inflation rate nor the growth rate of real GDP.

Question 3

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.

Question 4

Which of the following concerning the history of U.S.inflation is not correct?

Accepted Answer

A) Prices rose at an average annual rate of about 4 percent over the last 70 years. 
B) There was about a 16-fold increase in the price level over the last 70 years. 
C) Inflation in the 1970s was below the average over the last 70 years. 
D) During it's history the United States has experienced periods of deflation. 
A) Prices rose at an average annual rate of about 4 percent over the last 70 years. 
B) There was about a 16-fold increase in the price level over the last 70 years. 
C) Inflation in the 1970s was below the average over the last 70 years. 
D) During it's history the United States has experienced periods of deflation.

Question 5

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 6

Velocity is computed as

Accepted Answer

A) (P × Y)/M. 
B) (P × M)/Y. 
C) (Y × M)/P. 
D) (Y × M)/V. 
A) (P × Y)/M. 
B) (P × M)/Y. 
C) (Y × M)/P. 
D) (Y × M)/V.

Question 7

Use the figure below for the following questions.
Figure 30-1
  
-Refer to Figure 30-1.If the money supply is MS₂ and the value of money is 2,there is excess

Accepted Answer

A) demand equal to the distance between A and C. 
B) demand equal to the distance between A and B. 
C) supply equal to the distance between A and C. 
D) supply equal to the distance between A and B. 
A) demand equal to the distance between A and C. 
B) demand equal to the distance between A and B. 
C) supply equal to the distance between A and C. 
D) supply equal to the distance between A and B.

Question 8

You buy stock and its price rises just as much as the price level.Before taxes you made

Accepted Answer

A) a nominal and real gain, and you pay taxes on the nominal gain. 
B) a nominal and real gain, but you pay taxes only on the real gain. 
C) a nominal gain, but no real gain, yet you pay taxes on the nominal gain. 
D) a nominal gain, but no real gain, so you pay no taxes on the nominal gain. 
A) a nominal and real gain, and you pay taxes on the nominal gain. 
B) a nominal and real gain, but you pay taxes only on the real gain. 
C) a nominal gain, but no real gain, yet you pay taxes on the nominal gain. 
D) a nominal gain, but no real gain, so you pay no taxes on the nominal gain.

Question 9

In the 1970s in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.The central banks might have done this by

Accepted Answer

A) selling bonds on the open market, which would have raised the value of money. 
B) purchasing bonds on the open market, which would have raised the value of money. 
C) selling bonds on the open market, which would have raised the value of money 
D) purchasing bonds on the open market, which would have lowered the value of money 
A) selling bonds on the open market, which would have raised the value of money. 
B) purchasing bonds on the open market, which would have raised the value of money. 
C) selling bonds on the open market, which would have raised the value of money 
D) purchasing bonds on the open market, which would have lowered the value of money

Question 10

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 11

Given a nominal interest rate of 6 percent,in which case would you earn the lowest after-tax real rate of interest?

Accepted Answer

A) Inflation is 4 percent; the tax rate is 25 percent. 
B) Inflation is 3 percent; the tax rate is 20 percent. 
C) Inflation is 2 percent; the tax rate is 15 percent. 
D) The after-tax real interest rate is the same for all of the above. 
A) Inflation is 4 percent; the tax rate is 25 percent. 
B) Inflation is 3 percent; the tax rate is 20 percent. 
C) Inflation is 2 percent; the tax rate is 15 percent. 
D) The after-tax real interest rate is the same for all of the above.

Question 12

Define each of the symbols and explain the meaning of M × V = P × Y.

Accepted Answer

M is the quantity of money,V is the velo

Question 13

High and unexpected inflation has a greater cost

Accepted Answer

A) for those who borrow than those who save. 
B) for those who hold a little money than for those who hold a lot of money. 
C) for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage. 
D) for savers in high income tax brackets than for savers in low income tax brackets. 
A) for those who borrow than those who save. 
B) for those who hold a little money than for those who hold a lot of money. 
C) for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage. 
D) for savers in high income tax brackets than for savers in low income tax brackets.

Question 14

Governments may prefer an inflation tax to some other kind of tax because the inflation tax

Accepted Answer

A) is easier to impose. 
B) reduces inflation. 
C) falls mainly on high-income individuals. 
D) reduces the real cost of government expenditure. 
A) is easier to impose. 
B) reduces inflation. 
C) falls mainly on high-income individuals. 
D) reduces the real cost of government expenditure.

Question 15

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

Question 16

Last year,Tealandia produced 50,000 bags of green tea.This was Tealandia's only production.Each bag sold at 4 units each of Tealandia's currency-the Leaf.Tealandia's money supply was 10,000.What was the velocity of money in Tealandia?

Accepted Answer

A) 20 
B) 5 
C) 1/20 
D) 1/5 
A) 20 
B) 5 
C) 1/20 
D) 1/5

Question 17

When the money market is drawn with the value of money on the vertical axis,the value of money 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 18

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Accepted Answer

A) The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B) The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C) The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D) None of the above is correct. 
A) The nominal interest rate was 8 percent and the inflation rate was 6 percent. 
B) The nominal interest rate was 6 percent and the inflation rate was 4 percent. 
C) The nominal interest rate was 4 percent and the inflation rate was 2 percent. 
D) None of the above is correct.

Question 19

Deflation

Accepted Answer

A) increases the ability to pay debts and raises the value of money. 
B) increases the ability to pay debts and lowers the value of money. 
C) reduces the ability to pay debts and raises the value of money. 
D) reduces the ability to pay debts and lowers the value of money. 
A) increases the ability to pay debts and raises the value of money. 
B) increases the ability to pay debts and lowers the value of money. 
C) reduces the ability to pay debts and raises the value of money. 
D) reduces the ability to pay debts and lowers the value of money.

Question 20

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

Accepted Answer

A) demanded increases. 
B) demanded decreases. 
C) supplied increases. 
D) supplied decreases. 
A) demanded increases. 
B) demanded decreases. 
C) supplied increases. 
D) supplied decreases.

Exam 30: Money Growth and Inflation

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

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate raises.

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

Which of the following concerning the history of U.S.inflation is not correct?

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

Velocity is computed as

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.If the money supply is MS₂ and the value of money is 2,there is excess

You buy stock and its price rises just as much as the price level.Before taxes you made

In the 1970s in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.The central banks might have done this by

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?

Given a nominal interest rate of 6 percent,in which case would you earn the lowest after-tax real rate of interest?

Define each of the symbols and explain the meaning of M × V = P × Y.

High and unexpected inflation has a greater cost

Governments may prefer an inflation tax to some other kind of tax because the inflation tax

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?

Last year,Tealandia produced 50,000 bags of green tea.This was Tealandia's only production.Each bag sold at 4 units each of Tealandia's currency-the Leaf.Tealandia's money supply was 10,000.What was the velocity of money in Tealandia?

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

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Deflation

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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