Question 1

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply creates an excess

Accepted Answer

A) supply of money causing people to spend more. 
B) supply of money causing people to spend less. 
C) demand for money causing people to spend more. 
D) demand for money causing people to spend less. 
A) supply of money causing people to spend more. 
B) supply of money causing people to spend less. 
C) demand for money causing people to spend more. 
D) demand for money causing people to spend less.

Question 2

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if:
a.the Fed increases the money supply.
b.people decide to demand less money at each value of money.

Accepted Answer

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a. The Fed increases the money supp

Question 3

The U.S.Treasury Department issues inflation-indexed bonds.What are inflation-indexed bonds and why are they important?

Accepted Answer

Inflation-indexed bonds are bonds whose

Question 4

On income tax forms,people are required to report

Accepted Answer

A) nominal interest earnings. 
B) real interest earnings. 
C) real capital gains. 
D) All of the above. 
A) nominal interest earnings. 
B) real interest earnings. 
C) real capital gains. 
D) All of the above.

Question 5

In order to maintain stable prices,a central bank must

Accepted Answer

A) maintain low interest rates. 
B) keep unemployment low. 
C) tightly control the money supply. 
D) sell indexed bonds. 
A) maintain low interest rates. 
B) keep unemployment low. 
C) tightly control the money supply. 
D) sell indexed bonds.

Question 6

When the money market is drawn with the value of money on the vertical axis,if the value of money is below the equilibrium level,

Accepted Answer

A) the price level will rise. 
B) the value of money will rise. 
C) money demand will shift left. 
D) money demand will shift right. 
A) the price level will rise. 
B) the value of money will rise. 
C) money demand will shift left. 
D) money demand will shift right.

Question 7

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 8

Over the last 70 years the average annual U.S.inflation rate was about

Accepted Answer

A) 2 percent implying that prices have increased 10-fold. 
B) 4 percent implying that prices have increased 10-fold. 
C) 2 percent implying that prices have increased 16-fold. 
D) 4 percent implying that prices increased about 16-fold. 
A) 2 percent implying that prices have increased 10-fold. 
B) 4 percent implying that prices have increased 10-fold. 
C) 2 percent implying that prices have increased 16-fold. 
D) 4 percent implying that prices increased about 16-fold.

Question 9

Nominal GDP measures

Accepted Answer

A) the total quantity of final goods and services produced. 
B) the dollar value of the economy's output of final goods and services. 
C) the total income received from producing final goods and services measured in constant dollars. 
D) None of the above is correct. 
A) the total quantity of final goods and services produced. 
B) the dollar value of the economy's output of final goods and services. 
C) the total income received from producing final goods and services measured in constant dollars. 
D) None of the above is correct.

Question 10

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 11

If P represents the price of goods and services measured in money,then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 12

When the money market is drawn with the value of money on the vertical axis,if the price level is above the equilibrium level,there is an

Accepted Answer

A) excess demand for money, so the price level will rise. 
B) excess demand for money, so the price level will fall. 
C) excess supply of money, so the price level will rise. 
D) excess supply of money, so the price level will fall. 
A) excess demand for money, so the price level will rise. 
B) excess demand for money, so the price level will fall. 
C) excess supply of money, so the price level will rise. 
D) excess supply of money, so the price level will fall.

Question 13

Kelly purchased ten shares of Gentech stock for $200 in year 1 and sold all the shares in year 2 for $220 a share.Between year 1 and year 2,the price level increased by 5%.The tax on capital gains is 50%.If the capital gains tax is on nominal gains,how much tax does Sally pay on her gain?

Accepted Answer

A) $90 
B) $95 
C) $100 
D) None of the above is correct. 
A) $90 
B) $95 
C) $100 
D) None of the above is correct.

Question 14

Sally purchased one share of Stryker stock for $200 in year 1 and sold that share in year 2 for $400.The inflation rate between year 1 and year 2 was 50%.If the capital gains tax is 50%,what's Sally's after tax-real capital gain if the tax is on nominal gains? What is it if the tax is on real gains?

Accepted Answer

A) $0, $50 
B) $50, $0 
C) $100, $50 
D) $100, $150 
A) $0, $50 
B) $50, $0 
C) $100, $50 
D) $100, $150

Question 15

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 16

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest

Question 17

Use the figure below for the following questions.
Figure 30-1
  
-Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

Accepted Answer

A) the equilibrium value of money decreases. 
B) the equilibrium price level decreases. 
C) the supply of money has decreased. 
D) the demand for goods and services will decrease. 
A) the equilibrium value of money decreases. 
B) the equilibrium price level decreases. 
C) the supply of money has decreased. 
D) the demand for goods and services will decrease.

Question 18

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 19

Use the figure below for the following questions.
Figure 30-1
  
-Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,the graph shows that

Accepted Answer

A) the demand for goods and services decreases. 
B) the economy's ability to produce goods and services increases. 
C) the equilibrium price level increases. 
D) the equilibrium value of money increases. 
A) the demand for goods and services decreases. 
B) the economy's ability to produce goods and services increases. 
C) the equilibrium price level increases. 
D) the equilibrium value of money increases.

Question 20

If inflation is higher than 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.

Exam 30: Money Growth and Inflation

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply creates an excess

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

The U.S.Treasury Department issues inflation-indexed bonds.What are inflation-indexed bonds and why are they important?

On income tax forms,people are required to report

In order to maintain stable prices,a central bank must

When the money market is drawn with the value of money on the vertical axis,if the value of money is below the equilibrium level,

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

Over the last 70 years the average annual U.S.inflation rate was about

Nominal GDP measures

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

If P represents the price of goods and services measured in money,then 1/P is the value of money measured in terms of goods and services.

When the money market is drawn with the value of money on the vertical axis,if the price level is above the equilibrium level,there is an

Kelly purchased ten shares of Gentech stock for $200 in year 1 and sold all the shares in year 2 for $220 a share.Between year 1 and year 2,the price level increased by 5%.The tax on capital gains is 50%.If the capital gains tax is on nominal gains,how much tax does Sally pay on her gain?

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

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

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

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,the graph shows that

If inflation is higher than expected,

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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