Question 1

As the price level decreases,the value of money

Accepted Answer

A) increases, so people want to hold more of it. 
B) increases, so people want to hold less of it. 
C) decreases, so people want to hold more of it. 
D) decreases, so people want to hold less of it. 
A) increases, so people want to hold more of it. 
B) increases, so people want to hold less of it. 
C) decreases, so people want to hold more of it. 
D) decreases, so people want to hold less of it.

Question 2

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in the

Accepted Answer

A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) money supply. 
A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) money supply.

Question 3

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 4

You put money in an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A) 1.2 percent 
B) 2.8 percent 
C) 4.8 percent 
D) None of the above is correct. 
A) 1.2 percent 
B) 2.8 percent 
C) 4.8 percent 
D) None of the above is correct.

Question 5

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 6

The price level is a

Accepted Answer

A) relative variable. 
B) dichotomous variable 
C) real variable. 
D) nominal variable. 
A) relative variable. 
B) dichotomous variable 
C) real variable. 
D) nominal variable.

Question 7

When the price level rises,the number of dollars needed to buy a representative basket of goods

Accepted Answer

A) increases, and so the value of money rises. 
B) increases, and so the value of money falls. 
C) decreases, and so the value of money rises. 
D) decreases, and so the value of money falls 
A) increases, and so the value of money rises. 
B) increases, and so the value of money falls. 
C) decreases, and so the value of money rises. 
D) decreases, and so the value of money falls

Question 8

The Fisher effect says that

Accepted Answer

A) the nominal interest rate adjusts one for one with the inflation rate. 
B) the growth rate of the money supply determines the inflation rate. 
C) real variables are heavily influenced by the monetary system. 
D) All of the above are correct. 
A) the nominal interest rate adjusts one for one with the inflation rate. 
B) the growth rate of the money supply determines the inflation rate. 
C) real variables are heavily influenced by the monetary system. 
D) All of the above are correct.

Question 9

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

Accepted Answer

A) money demand slopes up and money supply is horizontal. 
B) money demand slopes down and money supply is vertical. 
C) money demand slopes up and money supply is vertical. 
D) money demand slopes down and money supply is horizontal. 
A) money demand slopes up and money supply is horizontal. 
B) money demand slopes down and money supply is vertical. 
C) money demand slopes up and money supply is vertical. 
D) money demand slopes down and money supply is horizontal.

Question 10

The source of hyperinflations is primarily

Accepted Answer

A) lower output growth. 
B) continuing declines in velocity. 
C) increased money supply growth. 
D) continuing increases in money demand. 
A) lower output growth. 
B) continuing declines in velocity. 
C) increased money supply growth. 
D) continuing increases in money demand.

Question 11

An increase in the price level makes the value of money

Accepted Answer

A) increase, so people want to hold more of it. 
B) increase, so people want to hold less of it. 
C) decrease, so people want to hold more of it. 
D) decrease, so people want to hold less of it. 
A) increase, so people want to hold more of it. 
B) increase, so people want to hold less of it. 
C) decrease, so people want to hold more of it. 
D) decrease, so people want to hold less of it.

Question 12

Wealth is distributed from creditors to debtors 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 13

The supply of money increases when

Accepted Answer

A) the value of money increases. 
B) the interest rate increases. 
C) the Fed makes open-market purchases. 
D) None of the above is correct. 
A) the value of money increases. 
B) the interest rate increases. 
C) the Fed makes open-market purchases. 
D) None of the above is correct.

Question 14

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 real interest rates. 
B) the inflation rate, but not real interest rates. 
C) real interest rates, but not the inflation rate. 
D) neither the inflation rate nor real interest rates. 
A) the inflation rate and real interest rates. 
B) the inflation rate, but not real interest rates. 
C) real interest rates, but not the inflation rate. 
D) neither the inflation rate nor real interest rates.

Question 15

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

Accepted Answer

A) 2 percent. 
B) 4 percent. 
C) 6 percent. 
D) 8 percent. 
A) 2 percent. 
B) 4 percent. 
C) 6 percent. 
D) 8 percent.

Question 16

Which of the following can a country increase in the long run by increasing its money growth rate?

Accepted Answer

A) the nominal wage divided by the price level 
B) real output 
C) real interest rates 
D) None of the above is correct. 
A) the nominal wage divided by the price level 
B) real output 
C) real interest rates 
D) None of the above is correct.

Question 17

If a country had deflation,

Accepted Answer

A) the nominal interest rate would be greater than the real interest rate. 
B) the real interest rate would be greater than the nominal interest rate. 
C) the real interest rate would equal the nominal interest rate. 
D) None of the above is necessarily correct. 
A) the nominal interest rate would be greater than the real interest rate. 
B) the real interest rate would be greater than the nominal interest rate. 
C) the real interest rate would equal the nominal interest rate. 
D) None of the above is necessarily correct.

Question 18

When deciding how much to save,people care most about

Accepted Answer

A) after-tax nominal interest rates. 
B) after-tax real interest rates. 
C) before-tax real interest rates. 
D) before-tax nominal interest rates. 
A) after-tax nominal interest rates. 
B) after-tax real interest rates. 
C) before-tax real interest rates. 
D) before-tax nominal interest rates.

Question 19

Which of the following is accurate?

Accepted Answer

A) Monetary policy is neutral in both the short run and the long run. 
B) Though monetary policy is neutral in the long run, it may have effects on real variables in the short run. 
C) Monetary policy has profound effects on real variables in both the short run and the long run. 
D) Monetary policy has profound effects on real variables in the long run, but is neutral in the short run. 
A) Monetary policy is neutral in both the short run and the long run. 
B) Though monetary policy is neutral in the long run, it may have effects on real variables in the short run. 
C) Monetary policy has profound effects on real variables in both the short run and the long run. 
D) Monetary policy has profound effects on real variables in the long run, but is neutral in the short run.

Question 20

The price of a Honda Accord

Accepted Answer

A) and the price of a Honda Accord divided by the price of a Honda Civic are both real variables. 
B) and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables. 
C) is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable. 
D) is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable. 
A) and the price of a Honda Accord divided by the price of a Honda Civic are both real variables. 
B) and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables. 
C) is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable. 
D) is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.

Exam 30: Money Growth and Inflation

As the price level decreases,the value of money

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in the

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

You put money in an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

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

The price level is a

When the price level rises,the number of dollars needed to buy a representative basket of goods

The Fisher effect says that

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

The source of hyperinflations is primarily

An increase in the price level makes the value of money

Wealth is distributed from creditors to debtors when inflation is

The supply of money increases when

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

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

Which of the following can a country increase in the long run by increasing its money growth rate?

If a country had deflation,

When deciding how much to save,people care most about

Which of the following is accurate?

The price of a Honda Accord

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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