Question 1

Other things remaining the same, if the quantity of money increases by a given percentage, then in the long run the ________ by the same percentage.

Accepted Answer

A)  price level rises 
B)  price level falls 
C)  real interest rate rises 
D)  real interest rate falls 
E)  nominal interest rate falls 
A)  price level rises 
B)  price level falls 
C)  real interest rate rises 
D)  real interest rate falls 
E)  nominal interest rate falls

Question 2

Inflation decreases the growth of capital because i. when the after-tax real interest rate falls, savings decreases.
Ii) velocity increases when inflation increases.
Iii) the higher the inflation rate, the higher is the true income tax rate on income from capital.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii

Question 3

If the Fed wants to lower the nominal interest rate in the long run, the Fed ________ the growth rate of the quantity of money.

Accepted Answer

A)  raises 
B)  lowers 
C)  does not change 
D)  first lowers and then raises 
E)  None of the above answers are correct because the premise of the question is wrong since the Fed cannot affect the nominal interest rate, only the real interest rate. 
A)  raises 
B)  lowers 
C)  does not change 
D)  first lowers and then raises 
E)  None of the above answers are correct because the premise of the question is wrong since the Fed cannot affect the nominal interest rate, only the real interest rate.

Question 4

If velocity is equal to 6, and the quantity of money is $50 billion, according to the equation of exchange nominal GDP is equal to

Accepted Answer

A)  $18 billion. 
B)  $8.3 billion. 
C)  $300 billion. 
D)  $56 billion. 
E)  $150 billion. 
A)  $18 billion. 
B)  $8.3 billion. 
C)  $300 billion. 
D)  $56 billion. 
E)  $150 billion.

Question 5

The long-run effect of a decrease in the growth rate of the quantity of money is a

Accepted Answer

A)  lower real interest rate. 
B)  higher real interest rate. 
C)  lower nominal interest rate. 
D)  higher nominal interest rate. 
E)  higher inflation rate. 
A)  lower real interest rate. 
B)  higher real interest rate. 
C)  lower nominal interest rate. 
D)  higher nominal interest rate. 
E)  higher inflation rate.

Question 6

Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year.How much is the real interest rate?

Accepted Answer

A)  1.56 percent 
B)  11.5 percent 
C)  2.5 percent 
D)  7 percent 
E)  4.5 percent 
A)  1.56 percent 
B)  11.5 percent 
C)  2.5 percent 
D)  7 percent 
E)  4.5 percent

Question 7

Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts

Accepted Answer

A)  rightward and the nominal interest rate decreases. 
B)  leftward and the nominal interest rate increases. 
C)  rightward and the real interest rate increases. 
D)  leftward and the real interest rate increases. 
E)  leftward and the nominal interest rate decreases. 
A)  rightward and the nominal interest rate decreases. 
B)  leftward and the nominal interest rate increases. 
C)  rightward and the real interest rate increases. 
D)  leftward and the real interest rate increases. 
E)  leftward and the nominal interest rate decreases.

Question 8

The opportunity cost of holding money

Accepted Answer

A)  increases as the nominal interest rate increases. 
B)  decreases as the nominal interest rate increases. 
C)  does not change with the changes in the nominal interest rate. 
D)  is fixed at all interest rates. 
E)  is the price level. 
A)  increases as the nominal interest rate increases. 
B)  decreases as the nominal interest rate increases. 
C)  does not change with the changes in the nominal interest rate. 
D)  is fixed at all interest rates. 
E)  is the price level.

Question 9

During a period of hyperinflation, as households and firms avoid holding money

Accepted Answer

A)  potential GDP increases. 
B)  long term savings accounts become more popular. 
C)  barter becomes more common. 
D)  capital investment increases. 
E)  the costs of inflation decrease. 
A)  potential GDP increases. 
B)  long term savings accounts become more popular. 
C)  barter becomes more common. 
D)  capital investment increases. 
E)  the costs of inflation decrease.

Question 10

The ________ real GDP, the ________.

Accepted Answer

A)  larger; larger the demand for money 
B)  larger; smaller the demand for money 
C)  smaller; larger the demand for money 
D)  larger; larger the supply of money 
E)  larger; smaller the supply of money 
A)  larger; larger the demand for money 
B)  larger; smaller the demand for money 
C)  smaller; larger the demand for money 
D)  larger; larger the supply of money 
E)  larger; smaller the supply of money

Question 11

What effect does an increase in real GDP have on the demand for money?

Accepted Answer

An increase in real GDP increa

Question 12

If real GDP grows by 3 percent, the velocity of circulation grows by -4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

Accepted Answer

A)  4 percent. 
B)  -4 percent. 
C)  -1 percent. 
D)  10 percent. 
E)  1 percent. 
A)  4 percent. 
B)  -4 percent. 
C)  -1 percent. 
D)  10 percent. 
E)  1 percent.

Question 13

As opportunity cost of holding money increases, people can

Accepted Answer

A)  do nothing. 
B)  try to maximize marginal benefit. 
C)  find a better job. 
D)  seek substitutes for money. 
E)  increase the demand for money but not the quantity of money they hold. 
A)  do nothing. 
B)  try to maximize marginal benefit. 
C)  find a better job. 
D)  seek substitutes for money. 
E)  increase the demand for money but not the quantity of money they hold.

Question 14

In the money market, in the short run in order to decrease the nominal interest rate, the Fed must

Accepted Answer

A)  increase the quantity of money. 
B)  increase the discount rate. 
C)  decrease the demand for money. 
D)  decrease the quantity of money. 
E)  directly lower the interest rate and not change either the demand for money or the supply of money. 
A)  increase the quantity of money. 
B)  increase the discount rate. 
C)  decrease the demand for money. 
D)  decrease the quantity of money. 
E)  directly lower the interest rate and not change either the demand for money or the supply of money.

Question 15

If the growth rate of the quantity of money is 4 percent per year, potential GDP and real GDP grow at 3 percent per year, and velocity does not change, in the long run what is the inflation rate?

Accepted Answer

With velocity constant, in the

Question 16

A consequence of hyperinflation is that people

Accepted Answer

A)  who make fixed-payment loans to others receive higher payments as inflation increases. 
B)  spend time trying to keep their money holdings near zero. 
C)  receive higher real wage hikes, which increases their purchasing power for goods and services. 
D)  want to lend funds because interest rates are so high. 
E)  increase the quantity of money demanded. 
A)  who make fixed-payment loans to others receive higher payments as inflation increases. 
B)  spend time trying to keep their money holdings near zero. 
C)  receive higher real wage hikes, which increases their purchasing power for goods and services. 
D)  want to lend funds because interest rates are so high. 
E)  increase the quantity of money demanded.

Question 17

In the money market, in the short run if the quantity of money exceeds the quantity of money demanded, then to achieve equilibrium the

Accepted Answer

A)  supply of money increases. 
B)  nominal interest rate falls. 
C)  inflation rate increases. 
D)  demand for money increases. 
E)  price level rises. 
A)  supply of money increases. 
B)  nominal interest rate falls. 
C)  inflation rate increases. 
D)  demand for money increases. 
E)  price level rises.

Question 18

Suppose the nominal interest rate is 4 percent and the price level is 110. If the Fed increases the quantity of money, in the short run

Accepted Answer

A)  the price level falls below 110. 
B)  the nominal interest rate rises above 4 percent. 
C)  neither the nominal interest rate nor the price level change. 
D)  the nominal interest rate falls below 4 percent. 
E)  None of the above answers are correct. 
A)  the price level falls below 110. 
B)  the nominal interest rate rises above 4 percent. 
C)  neither the nominal interest rate nor the price level change. 
D)  the nominal interest rate falls below 4 percent. 
E)  None of the above answers are correct.

Question 19

The demand for money curve shows the relationship between the quantity of money demanded and

Accepted Answer

A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the price level. 
E)  real GDP. 
A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the price level. 
E)  real GDP.

Question 20

If the quantity of money grows at 4 percent a year, velocity grows at 2 percent, and real GDP grows at 2 percent a year, then the inflation rate equals

Accepted Answer

A)  6 percent. 
B)  2 percent. 
C)  0 percent. 
D)  8 percent. 
E)  4 percent. 
A)  6 percent. 
B)  2 percent. 
C)  0 percent. 
D)  8 percent. 
E)  4 percent.

Other things remaining the same, if the quantity of money increases by a given percentage, then in the long run the ________ by the same percentage.

Inflation decreases the growth of capital because i. when the after-tax real interest rate falls, savings decreases. Ii) velocity increases when inflation increases. Iii) the higher the inflation rate, the higher is the true income tax rate on income from capital.

If the Fed wants to lower the nominal interest rate in the long run, the Fed ________ the growth rate of the quantity of money.

If velocity is equal to 6, and the quantity of money is $50 billion, according to the equation of exchange nominal GDP is equal to

The long-run effect of a decrease in the growth rate of the quantity of money is a

Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year.How much is the real interest rate?

Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts

The opportunity cost of holding money

During a period of hyperinflation, as households and firms avoid holding money

The real GDP, the .

What effect does an increase in real GDP have on the demand for money?

If real GDP grows by 3 percent, the velocity of circulation grows by -4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

As opportunity cost of holding money increases, people can

In the money market, in the short run in order to decrease the nominal interest rate, the Fed must

If the growth rate of the quantity of money is 4 percent per year, potential GDP and real GDP grow at 3 percent per year, and velocity does not change, in the long run what is the inflation rate?

A consequence of hyperinflation is that people

In the money market, in the short run if the quantity of money exceeds the quantity of money demanded, then to achieve equilibrium the

Suppose the nominal interest rate is 4 percent and the price level is 110. If the Fed increases the quantity of money, in the short run

The demand for money curve shows the relationship between the quantity of money demanded and

If the quantity of money grows at 4 percent a year, velocity grows at 2 percent, and real GDP grows at 2 percent a year, then the inflation rate equals

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 12: Money, Interest, and Inflation

Other things remaining the same, if the quantity of money increases by a given percentage, then in the long run the ________ by the same percentage.

Inflation decreases the growth of capital because i. when the after-tax real interest rate falls, savings decreases. Ii) velocity increases when inflation increases. Iii) the higher the inflation rate, the higher is the true income tax rate on income from capital.

If the Fed wants to lower the nominal interest rate in the long run, the Fed ________ the growth rate of the quantity of money.

If velocity is equal to 6, and the quantity of money is $50 billion, according to the equation of exchange nominal GDP is equal to

The long-run effect of a decrease in the growth rate of the quantity of money is a

Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year.How much is the real interest rate?

Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts

The opportunity cost of holding money

During a period of hyperinflation, as households and firms avoid holding money

The ________ real GDP, the ________.

What effect does an increase in real GDP have on the demand for money?

If real GDP grows by 3 percent, the velocity of circulation grows by -4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

As opportunity cost of holding money increases, people can

In the money market, in the short run in order to decrease the nominal interest rate, the Fed must

If the growth rate of the quantity of money is 4 percent per year, potential GDP and real GDP grow at 3 percent per year, and velocity does not change, in the long run what is the inflation rate?

A consequence of hyperinflation is that people

In the money market, in the short run if the quantity of money exceeds the quantity of money demanded, then to achieve equilibrium the

Suppose the nominal interest rate is 4 percent and the price level is 110. If the Fed increases the quantity of money, in the short run

The demand for money curve shows the relationship between the quantity of money demanded and

If the quantity of money grows at 4 percent a year, velocity grows at 2 percent, and real GDP grows at 2 percent a year, then the inflation rate equals

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

The real GDP, the .