Question 1

The shoeleather cost of inflation refers to

Accepted Answer

A) the redistributional effects of unexpected inflation. 
B) the time spent searching for low prices when inflation rises. 
C) the waste of resources used to maintain lower money holdings. 
D) the increased cost to the government of printing more money. 
A) the redistributional effects of unexpected inflation. 
B) the time spent searching for low prices when inflation rises. 
C) the waste of resources used to maintain lower money holdings. 
D) the increased cost to the government of printing more money.

Question 2

A rising price level eliminates an excess supply of money.

Accepted Answer

A) True 
 B)False

Question 3

If velocity and output were nearly constant,

Accepted Answer

A) the inflation rate would be much higher than the money supply growth rate. 
B) the inflation rate would be about the same as the money supply growth rate. 
C) the inflation rate would be much lower than the money supply growth rate. 
D) any of the above would be possible. 
A) the inflation rate would be much higher than the money supply growth rate. 
B) the inflation rate would be about the same as the money supply growth rate. 
C) the inflation rate would be much lower than the money supply growth rate. 
D) any of the above would be possible.

Question 4

The United States has never had deflation.

Accepted Answer

A) True 
 B)False

Question 5

Suppose one year ago that the price index was 120 and Mark purchased $20,000 worth of bonds.One year later the price index is 126.Mark redeems his bonds for $22,250 and is in a 40% tax bracket.What is Mark's real after-tax rate of interest to the nearest tenth of a percent?

Accepted Answer

A) 4.3% 
B) 3.1% 
C) 1.8% 
D) 1.2% 
A) 4.3% 
B) 3.1% 
C) 1.8% 
D) 1.2%

Question 6

Wealth is redistributed from debtors to creditors when inflation is

Accepted Answer

A) high, but expected. 
B) low, but expected. 
C) unexpectedly high. 
D) unexpectedly low. 
A) high, but expected. 
B) low, but expected. 
C) unexpectedly high. 
D) unexpectedly low.

Question 7

Economists agree that increases in the money supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically,the government in countries th

Question 8

Monetary neutrality implies that an increase in the quantity of money will

Accepted Answer

A) increase employment. 
B) increase the price level. 
C) increase the incentive to save. 
D) Not increase any of the above. 
A) increase employment. 
B) increase the price level. 
C) increase the incentive to save. 
D) Not increase any of the above.

Question 9

Between 1880 and 1886 prices that were

Accepted Answer

A) lower than expected transferred wealth from creditors to debtors. 
B) lower than expected transferred wealth from debtors to creditors. 
C) higher than expected transferred wealth from creditors to debtors. 
D) higher than expected transferred wealth from debtors to creditors. 
A) lower than expected transferred wealth from creditors to debtors. 
B) lower than expected transferred wealth from debtors to creditors. 
C) higher than expected transferred wealth from creditors to debtors. 
D) higher than expected transferred wealth from debtors to creditors.

Question 10

The money supply curve shifts to the left when the Fed buys government bonds.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) the price level and nominal wages 
B) the price level, but not the nominal wage 
C) the nominal wage, but not the price level 
D) neither the nominal wage nor the price level 
A) the price level and nominal wages 
B) the price level, but not the nominal wage 
C) the nominal wage, but not the price level 
D) neither the nominal wage nor the price level

Question 12

Most economists believe the principle of monetary neutrality is

Accepted Answer

A) relevant to both the short and long run. 
B) irrelevant to both the short and long run. 
C) mostly relevant to the short run. 
D) mostly relevant to the long run. 
A) relevant to both the short and long run. 
B) irrelevant to both the short and long run. 
C) mostly relevant to the short run. 
D) mostly relevant to the long run.

Question 13

Identify each of the following as nominal or real variables.
a.the physical output of goods and services
b.the overall price level
c.the dollar price of apples
d.the price of apples relative to the price of oranges
e.the unemployment rate
f.the amount that shows up on your paycheck after taxes
g.the amount of goods you can purchase with the wage you get each hour
h.the taxes that you pay the government

Accepted Answer

a. real variable
b. nominal va

Question 14

When the money market is drawn with the value of money on the vertical axis,an increase in the price level causes a

Accepted Answer

A) shift to the right of the money demand curve. 
B) shift to the left of the money demand curve. 
C) movement to the left along the money demand curve. 
D) movement to the right along the money demand curve. 
A) shift to the right of the money demand curve. 
B) shift to the left of the money demand curve. 
C) movement to the left along the money demand curve. 
D) movement to the right along the money demand curve.

Question 15

Suppose that velocity rises while the money supply stays the same.It follows that

Accepted Answer

A) P x Y must rise. 
B) P x Y must fall. 
C) P x Y must be unchanged. 
D) the effects on P x Y are uncertain. 
A) P x Y must rise. 
B) P x Y must fall. 
C) P x Y must be unchanged. 
D) the effects on P x Y are uncertain.

Question 16

An associate professor of economics gets a $100 a month raise.She figures that with her current monthly salary she can't buy as many goods as she could last year.

Accepted Answer

A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen. 
A) Her real and nominal salary have risen. 
B) Her real and nominal salary have fallen. 
C) Her real salary has risen and her nominal salary has fallen. 
D) Her real salary has fallen and her nominal salary has risen.

Question 17

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Accepted Answer

A) True 
 B)False

Question 18

The price level rises from 120 to 150.What was the inflation rate?

Accepted Answer

A) 30% 
B) 25% 
C) 20% 
D) None of the above is correct. 
A) 30% 
B) 25% 
C) 20% 
D) None of the above is correct.

Question 19

Economic variables whose values are measured in monetary units are called

Accepted Answer

A) dichotomous variables. 
B) nominal variables. 
C) classical variables. 
D) real variables. 
A) dichotomous variables. 
B) nominal variables. 
C) classical variables. 
D) real variables.

Question 20

You buy a stock and its price rises less than 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 gain and a real loss, and you don't have to pay taxes since you gained less than the change in the price level. 
C) a nominal and a real gain, and you pay taxes on the real gain. 
D) a nominal gain and a real loss, and you pay taxes on the nominal gain. 
A) a nominal and real gain, and you pay taxes on the nominal gain. 
B) a nominal gain and a real loss, and you don't have to pay taxes since you gained less than the change in the price level. 
C) a nominal and a real gain, and you pay taxes on the real gain. 
D) a nominal gain and a real loss, and you pay taxes on the nominal gain.

Exam 30: Money Growth and Inflation

The shoeleather cost of inflation refers to

A rising price level eliminates an excess supply of money.

If velocity and output were nearly constant,

The United States has never had deflation.

Suppose one year ago that the price index was 120 and Mark purchased $20,000 worth of bonds.One year later the price index is 126.Mark redeems his bonds for $22,250 and is in a 40% tax bracket.What is Mark's real after-tax rate of interest to the nearest tenth of a percent?

Wealth is redistributed from debtors to creditors when inflation is

Economists agree that increases in the money supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Monetary neutrality implies that an increase in the quantity of money will

Between 1880 and 1886 prices that were

The money supply curve shifts to the left when the Fed buys government bonds.

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

Most economists believe the principle of monetary neutrality is

When the money market is drawn with the value of money on the vertical axis,an increase in the price level causes a

Suppose that velocity rises while the money supply stays the same.It follows that

An associate professor of economics gets a $100 a month raise.She figures that with her current monthly salary she can't buy as many goods as she could last year.

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

The price level rises from 120 to 150.What was the inflation rate?

Economic variables whose values are measured in monetary units are called

You buy a stock and its price rises less than the price level.Before taxes you made

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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