Question 1

To an economist, money

Accepted Answer

A)  is wealth that is not easily spent. 
B)  is a precious metal such as gold. 
C)  is wealth that is held in a readily spendable form. 
D)  is equal to the difference between total revenue and total cost of a business. 
A)  is wealth that is not easily spent. 
B)  is a precious metal such as gold. 
C)  is wealth that is held in a readily spendable form. 
D)  is equal to the difference between total revenue and total cost of a business. C

Question 2

A very important cost of unexpected inflation is

Accepted Answer

A)  that it creates a windfall gain for property owners. 
B)  that it creates uncertainty and unpredictability. 
C)  that it has a tendency to increase nominal interest rates and thus reduce investment spending. 
D)  that it creates a windfall gain for creditors. 
A)  that it creates a windfall gain for property owners. 
B)  that it creates uncertainty and unpredictability. 
C)  that it has a tendency to increase nominal interest rates and thus reduce investment spending. 
D)  that it creates a windfall gain for creditors. B

Question 3

The classical dichotomy means that

Accepted Answer

A)  real variables (such as real GDP, real investment spending, or the real exchange rate) can be analyzed and calculated without thinking of nominal variables such as the price level. 
B)  real variables (such as the price level)can be analyzed and calculated without thinking of nominal variables such as real GDP, real investment spending, or the real exchange rate. 
C)  real variables (such as real GDP, real investment spending, or the real exchange rate) cannot be analyzed and calculated without thinking of nominal variables such as the price level. 
D)  real variables (such as real GDP, real investment spending, or the price level) can be analyzed and calculated with out thinking of nominal variables such as wage rate. 
A)  real variables (such as real GDP, real investment spending, or the real exchange rate) can be analyzed and calculated without thinking of nominal variables such as the price level. 
B)  real variables (such as the price level)can be analyzed and calculated without thinking of nominal variables such as real GDP, real investment spending, or the real exchange rate. 
C)  real variables (such as real GDP, real investment spending, or the real exchange rate) cannot be analyzed and calculated without thinking of nominal variables such as the price level. 
D)  real variables (such as real GDP, real investment spending, or the price level) can be analyzed and calculated with out thinking of nominal variables such as wage rate. A

Question 4

The questions with which Chapter 8 is concerned include each of the following except

Accepted Answer

A)  What do economists mean when they say "money"? 
B)  Why would a government ever generate hyperinflation? 
C)  Why is inflation always caused by too much money in the economy? 
D)  Why is inflation best avoided? 
A)  What do economists mean when they say "money"? 
B)  Why would a government ever generate hyperinflation? 
C)  Why is inflation always caused by too much money in the economy? 
D)  Why is inflation best avoided?

Question 5

The expected real return on holding wealth in readily spendable form is

Accepted Answer

A)  the expected nomianl interest rate. 
B)  the expected real interest rate. 
C)  the expected inflation rate. 
D)  the negative of the expected inflation rate 
A)  the expected nomianl interest rate. 
B)  the expected real interest rate. 
C)  the expected inflation rate. 
D)  the negative of the expected inflation rate

Question 6

The nominal interest rate is

Accepted Answer

A)  the sum of the real interest rate and the current inflation rate. 
B)  the difference between the real interest rate and the current exchange rate. 
C)  the real interest rate times the current inflation rate. 
D)  the real interest rate plus the real exchange rate. 
A)  the sum of the real interest rate and the current inflation rate. 
B)  the difference between the real interest rate and the current exchange rate. 
C)  the real interest rate times the current inflation rate. 
D)  the real interest rate plus the real exchange rate.

Question 7

The benefit of holding money in one's portfolio is

Accepted Answer

A)  the rate of return foregone by not holding interest-bearing assets. 
B)  the high rate of interest earned on money balances. 
C)  that it makes buying things easier. 
D)  that holding money is necessary in order to buy things. 
A)  the rate of return foregone by not holding interest-bearing assets. 
B)  the high rate of interest earned on money balances. 
C)  that it makes buying things easier. 
D)  that holding money is necessary in order to buy things.

Question 8

The overall price level is

Accepted Answer

A)  the marginal level of nominal prices in an economy. 
B)  the average level of real prices in an economy. 
C)  the marginal level of real prices in an economy. 
D)  the average level of nominal prices in an economy. 
A)  the marginal level of nominal prices in an economy. 
B)  the average level of real prices in an economy. 
C)  the marginal level of real prices in an economy. 
D)  the average level of nominal prices in an economy.

Question 9

The amount of wealth households and businesses wish to hold in the form of money depends on

Accepted Answer

A)  the benefits of holding money - the interest and profits gained - and the opportunity cost - the ease of making transactions gained. 
B)  the benefits of holding money - the status gained by doing so - and the opportunity cost - the cost of transactions not made. 
C)  the benefits of holding money - the ease of transactions gained - and the opportunity cost - the lost interest and profits. 
D)  the savings rate of households and businesses. 
A)  the benefits of holding money - the interest and profits gained - and the opportunity cost - the ease of making transactions gained. 
B)  the benefits of holding money - the status gained by doing so - and the opportunity cost - the cost of transactions not made. 
C)  the benefits of holding money - the ease of transactions gained - and the opportunity cost - the lost interest and profits. 
D)  the savings rate of households and businesses.

Question 10

If the velocity remains constant, the money supply increases by 4% per year, and real GDP increases by 2%, then inflation  $\pi$ will equal

Accepted Answer

A)  -2% 
B)  2% 
C)  6% 
D)  0% 
A)  -2% 
B)  2% 
C)  6% 
D)  0%

Question 11

Each of the following is part of the economy's stock of money except

Accepted Answer

A)  coin and currency that are transferred by handing the cash over to the seller. 
B)  credit cards held by the private sector. 
C)  checking account balances that are transferred by electronic debit or by writing a check. 
D)  other assets, like savings account balances, that can be turned into cash or demand deposits nearly . instantaneously, risklessly, and costlessly. 
A)  coin and currency that are transferred by handing the cash over to the seller. 
B)  credit cards held by the private sector. 
C)  checking account balances that are transferred by electronic debit or by writing a check. 
D)  other assets, like savings account balances, that can be turned into cash or demand deposits nearly . instantaneously, risklessly, and costlessly.

Question 12

The most significant cost of moderate inflation that is greater than expected is

Accepted Answer

A)  that it redistributes wealth from debtors to creditors. 
B)  that it redistributes income from wage workers to salaried workers. 
C)  that it redistributes income from the service sector to the manufacturing sector. 
D)  that it redistributes wealth from creditors to debtors. 
A)  that it redistributes wealth from debtors to creditors. 
B)  that it redistributes income from wage workers to salaried workers. 
C)  that it redistributes income from the service sector to the manufacturing sector. 
D)  that it redistributes wealth from creditors to debtors.

Question 13

One problem with the quantity theory of money is that, in the real world,

Accepted Answer

A)  real GDP fluctuates greatly. 
B)  real wages fluctuate greatly. 
C)  inflation is not always proportional to money growth. 
D)  the velocity of money never changes. 
A)  real GDP fluctuates greatly. 
B)  real wages fluctuate greatly. 
C)  inflation is not always proportional to money growth. 
D)  the velocity of money never changes.

Question 14

In the flexible price macroeconomy with the demand for money inversely related to the nominal interest rate, an increase in the rate of growth of the money supply

Accepted Answer

A)  leads to an immediate jump in real GDP, to an increase in the inflation rate, to a decrease in the quantity of money demanded, and to an increase in the velocity of money. 
B)  leads to an immediate jump in the price level, to an increase in the inflation rate, to a decrease in the quantity of money demanded, and to an increase in the velocity of money. 
C)  leads to an immediate jump in real GDP, to a decrease in the inflation rate, and to a decrease in the quantity of money demanded, and to a decrease in the velocity of money. 
D)  leads to an immediate jump in the price level, to an increase in the inflation rate, to an increase in the quantity of money demanded, and to a decrease in the velocity of money. 
A)  leads to an immediate jump in real GDP, to an increase in the inflation rate, to a decrease in the quantity of money demanded, and to an increase in the velocity of money. 
B)  leads to an immediate jump in the price level, to an increase in the inflation rate, to a decrease in the quantity of money demanded, and to an increase in the velocity of money. 
C)  leads to an immediate jump in real GDP, to a decrease in the inflation rate, and to a decrease in the quantity of money demanded, and to a decrease in the velocity of money. 
D)  leads to an immediate jump in the price level, to an increase in the inflation rate, to an increase in the quantity of money demanded, and to a decrease in the velocity of money.

Question 15

The process of a central bank buying and selling government bonds is called

Accepted Answer

A)  fiscal policy. 
B)  changing the discount rate. 
C)  changing the federal funds rate. 
D)  open market operations. 
A)  fiscal policy. 
B)  changing the discount rate. 
C)  changing the federal funds rate. 
D)  open market operations.

Question 16

The opportunity cost of holding money is

Accepted Answer

A)  the real rate of interest. 
B)  the negative of the expected inflation rate. 
C)  the sum of the real interest rate and the expected inflation rate. 
D)  the difference between the expected inflation rate and the real interest rate 
A)  the real rate of interest. 
B)  the negative of the expected inflation rate. 
C)  the sum of the real interest rate and the expected inflation rate. 
D)  the difference between the expected inflation rate and the real interest rate

Question 17

In the flexible-price model of the macroeconomy with a given velocity of money and real GDP, the price level is determined by

Accepted Answer

A)  the wealth level of households and businesses. 
B)  the stock of money in the economy. 
C)  the amount of savings in the economy. 
D)  the amount of total spending in the economy. 
A)  the wealth level of households and businesses. 
B)  the stock of money in the economy. 
C)  the amount of savings in the economy. 
D)  the amount of total spending in the economy.

Question 18

One of the reasons for exploring what determines the overall level of prices and the rate of inflation in our flexible-price full-employment model of the macroeconomy is that

Accepted Answer

A)  over the short-run, wages and prices are effectively flexible. 
B)  over relatively long periods of time, wages and prices are effectively flexible. 
C)  wages and prices are always flexible, as assumed in the model. 
D)  unemployment very rarely occurs anymore. 
A)  over the short-run, wages and prices are effectively flexible. 
B)  over relatively long periods of time, wages and prices are effectively flexible. 
C)  wages and prices are always flexible, as assumed in the model. 
D)  unemployment very rarely occurs anymore.

Question 19

If the real GDP is equal to $8 trillion, the stock of money is equal to $2 trillion, and the velocity of money is equal to 5, the price level would be equal to

Accepted Answer

A)  20. 
B)  3.2 
C)  1.25 
D)  8.4. 
A)  20. 
B)  3.2 
C)  1.25 
D)  8.4.

Question 20

If the expected inflation rate decreases, the demand for money will ________ and the velocity of money will ________.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease

To an economist, money

A very important cost of unexpected inflation is

The classical dichotomy means that

The questions with which Chapter 8 is concerned include each of the following except

The expected real return on holding wealth in readily spendable form is

The nominal interest rate is

The benefit of holding money in one's portfolio is

The overall price level is

The amount of wealth households and businesses wish to hold in the form of money depends on

If the velocity remains constant, the money supply increases by 4% per year, and real GDP increases by 2%, then inflation $\pi$ will equal

Each of the following is part of the economy's stock of money except

The most significant cost of moderate inflation that is greater than expected is

One problem with the quantity theory of money is that, in the real world,

In the flexible price macroeconomy with the demand for money inversely related to the nominal interest rate, an increase in the rate of growth of the money supply

The process of a central bank buying and selling government bonds is called

The opportunity cost of holding money is

In the flexible-price model of the macroeconomy with a given velocity of money and real GDP, the price level is determined by

One of the reasons for exploring what determines the overall level of prices and the rate of inflation in our flexible-price full-employment model of the macroeconomy is that

If the real GDP is equal to $8 trillion, the stock of money is equal to $2 trillion, and the velocity of money is equal to 5, the price level would be equal to

If the expected inflation rate decreases, the demand for money will and the velocity of money will .

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 8: Money, Prices, and Inflation

To an economist, money

A very important cost of unexpected inflation is

The classical dichotomy means that

The questions with which Chapter 8 is concerned include each of the following except

The expected real return on holding wealth in readily spendable form is

The nominal interest rate is

The benefit of holding money in one's portfolio is

The overall price level is

The amount of wealth households and businesses wish to hold in the form of money depends on

If the velocity remains constant, the money supply increases by 4% per year, and real GDP increases by 2%, then inflation π\piπ will equal

Each of the following is part of the economy's stock of money except

The most significant cost of moderate inflation that is greater than expected is

One problem with the quantity theory of money is that, in the real world,

In the flexible price macroeconomy with the demand for money inversely related to the nominal interest rate, an increase in the rate of growth of the money supply

The process of a central bank buying and selling government bonds is called

The opportunity cost of holding money is

In the flexible-price model of the macroeconomy with a given velocity of money and real GDP, the price level is determined by

One of the reasons for exploring what determines the overall level of prices and the rate of inflation in our flexible-price full-employment model of the macroeconomy is that

If the real GDP is equal to $8 trillion, the stock of money is equal to $2 trillion, and the velocity of money is equal to 5, the price level would be equal to

If the expected inflation rate decreases, the demand for money will ________ and the velocity of money will ________.

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

If the velocity remains constant, the money supply increases by 4% per year, and real GDP increases by 2%, then inflation $\pi$ will equal

If the expected inflation rate decreases, the demand for money will and the velocity of money will .