Question 1

Use the figure below for the following questions.
Figure 30-1
  
-Refer to Figure 30-1.If the current money supply is located at MS₁,

Accepted Answer

A) there is no excess supply or excess demand if the value of money is 2. 
B) the equilibrium is at point C. 
C) there is an excess supply of money if the value of money is 1. 
D) None of the above is correct. 
A) there is no excess supply or excess demand if the value of money is 2. 
B) the equilibrium is at point C. 
C) there is an excess supply of money if the value of money is 1. 
D) None of the above is correct.

Question 2

When the money supply and the price level in countries that experienced hyperinflation are plotted against time,we see that

Accepted Answer

A) the price level grew at about the same rate as the money supply. 
B) the price level grew at a much faster rate than the money supply. 
C) the price level grew at a much slower rate than the money supply. 
D) the inflation rate and the money supply growth rate do not appear to be related. 
A) the price level grew at about the same rate as the money supply. 
B) the price level grew at a much faster rate than the money supply. 
C) the price level grew at a much slower rate than the money supply. 
D) the inflation rate and the money supply growth rate do not appear to be related.

Question 3

Suppose that monetary neutrality holds.Of the following variables,which ones do not change when the money supply increases?
a.real interest rates
b.inflation
c.the price level
d.real output
e.real wages
f.nominal wages

Accepted Answer

The answer of Suppose that monetary neutrality holds.Of the following...

Question 4

Which of the following is correct?

Accepted Answer

A) If the Fed purchases bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
B) If the Fed sells bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
C) If the Fed purchases bonds, then the money supply curve shifts right.An increase in the price level shifts the money supply curve right. 
D) If the Fed sells bonds, then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right. 
A) If the Fed purchases bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
B) If the Fed sells bonds in the open market, then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
C) If the Fed purchases bonds, then the money supply curve shifts right.An increase in the price level shifts the money supply curve right. 
D) If the Fed sells bonds, then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right.

Question 5

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

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 6

If V and M are constant,and Y doubles,the quantity equation implies that the price level

Accepted Answer

A) falls to half its original level. 
B) does not change. 
C) doubles. 
D) more than doubles. 
A) falls to half its original level. 
B) does not change. 
C) doubles. 
D) more than doubles.

Question 7

Based on the quantity equation,if M = 100,V = 3,and Y = 200,then P =

Accepted Answer

A) 1. 
B) 1.5. 
C) 2. 
D) None of the above is correct. 
A) 1. 
B) 1.5. 
C) 2. 
D) None of the above is correct.

Question 8

The classical theory of inflation

Accepted Answer

A) is also known as the quantity theory of money. 
B) was developed by some of the earliest economic thinkers. 
C) is used by most modern economists to explain the long-run determinants of the inflation rate. 
D) All of the above are correct. 
A) is also known as the quantity theory of money. 
B) was developed by some of the earliest economic thinkers. 
C) is used by most modern economists to explain the long-run determinants of the inflation rate. 
D) All of the above are correct.

Question 9

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Accepted Answer

A) True 
 B)False

Question 10

The real interest rate is 8 percent and the nominal interest rate is 12 percent.Is there inflation or deflation? What is the inflation or deflation rate?

Accepted Answer

A) deflation; 1.5 percent 
B) deflation; 4 percent 
C) inflation; 1.5 percent 
D) inflation; 4 percent 
A) deflation; 1.5 percent 
B) deflation; 4 percent 
C) inflation; 1.5 percent 
D) inflation; 4 percent

Question 11

The principle of monetary neutrality implies that an increase in the money supply will

Accepted Answer

A) increase real GDP and the price level. 
B) increase real GDP, but not the price level. 
C) increase the price level, but not real GDP. 
D) increase neither the price level nor real GDP. 
A) increase real GDP and the price level. 
B) increase real GDP, but not the price level. 
C) increase the price level, but not real GDP. 
D) increase neither the price level nor real GDP.

Question 12

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Accepted Answer

A) True 
 B)False

Question 13

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Accepted Answer

Relative prices are the value of one goo

Question 14

Interest rates for savings accounts listed on your bank's website

Accepted Answer

A) and a price index are real variables. 
B) and a price index are nominal variables. 
C) are real variable and a price index is a nominal variable. 
D) are nominal variables, and price index is a real variable 
A) and a price index are real variables. 
B) and a price index are nominal variables. 
C) are real variable and a price index is a nominal variable. 
D) are nominal variables, and price index is a real variable

Question 15

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 16

As inflation rises,people will tend to

Accepted Answer

A) go to the bank more often.This is known as menu costs. 
B) go to the bank more often.This is known as shoeleather costs. 
C) go to the bank less often.This is known as the inflation fallacy. 
D) go to the bank less often.This is known as redistribution costs. 
A) go to the bank more often.This is known as menu costs. 
B) go to the bank more often.This is known as shoeleather costs. 
C) go to the bank less often.This is known as the inflation fallacy. 
D) go to the bank less often.This is known as redistribution costs.

Question 17

Inflation can be measured by the

Accepted Answer

A) change in the consumer price index. 
B) percentage change in the consumer price index. 
C) percentage change in the price of a specific commodity. 
D) change in the price of a specific commodity. 
A) change in the consumer price index. 
B) percentage change in the consumer price index. 
C) percentage change in the price of a specific commodity. 
D) change in the price of a specific commodity.

Question 18

If Y and M are constant,and V doubles,the quantity equation implies that the price level

Accepted Answer

A) falls to half it's original level. 
B) doubles. 
C) more than doubles. 
D) does not change. 
A) falls to half it's original level. 
B) doubles. 
C) more than doubles. 
D) does not change.

Question 19

Sally sells 40 bags of lettuce for a total of $80 at the farmers' market.

Accepted Answer

A) The $80 is a real variable.The quantity of lettuce is a nominal variable. 
B) The $80 is a nominal variable.The quantity of lettuce is a real variable. 
C) Both the $80 and the quantity of lettuce are nominal variables. 
D) Both the $80 and the quantity of lettuce are real variables. 
A) The $80 is a real variable.The quantity of lettuce is a nominal variable. 
B) The $80 is a nominal variable.The quantity of lettuce is a real variable. 
C) Both the $80 and the quantity of lettuce are nominal variables. 
D) Both the $80 and the quantity of lettuce are real variables.

Question 20

The quantity theory of money can explain hyperinflations but not moderate inflation.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.If the current money supply is located at MS₁,

When the money supply and the price level in countries that experienced hyperinflation are plotted against time,we see that

Suppose that monetary neutrality holds.Of the following variables,which ones do not change when the money supply increases? a.real interest rates b.inflation c.the price level d.real output e.real wages f.nominal wages

Which of the following is correct?

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

If V and M are constant,and Y doubles,the quantity equation implies that the price level

Based on the quantity equation,if M = 100,V = 3,and Y = 200,then P =

The classical theory of inflation

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

The real interest rate is 8 percent and the nominal interest rate is 12 percent.Is there inflation or deflation? What is the inflation or deflation rate?

The principle of monetary neutrality implies that an increase in the money supply will

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Interest rates for savings accounts listed on your bank's website

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

As inflation rises,people will tend to

Inflation can be measured by the

If Y and M are constant,and V doubles,the quantity equation implies that the price level

Sally sells 40 bags of lettuce for a total of $80 at the farmers' market.

The quantity theory of money can explain hyperinflations but not moderate inflation.

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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