Question 1

The "shoe-leather costs" of inflation are the costs from

Accepted Answer

A)  higher prices for all goods, including necessities such as shoes. 
B)  the government taking a higher percentage of interest income. 
C)  confusion as people lose track of real costs and benefits. 
D)  time spent trying to spend money quickly. 
E)  higher taxes due to higher inflation. 
A)  higher prices for all goods, including necessities such as shoes. 
B)  the government taking a higher percentage of interest income. 
C)  confusion as people lose track of real costs and benefits. 
D)  time spent trying to spend money quickly. 
E)  higher taxes due to higher inflation.

Question 2

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

Question 3

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

Accepted Answer

According to the quantity theo

Question 4

If the price level is 2, real GDP is $50 billion, and the quantity of money is $4 billion, then velocity is

Accepted Answer

A)  4. 
B)  10. 
C)  25. 
D)  12.5. 
E)  8. 
A)  4. 
B)  10. 
C)  25. 
D)  12.5. 
E)  8.

Question 5

In the long run, when the Fed increases the quantity of money, the

Accepted Answer

A)  price level rises. 
B)  nominal interest rate falls. 
C)  demand for money decreases. 
D)  price level falls. 
E)  real interest rate rises. 
A)  price level rises. 
B)  nominal interest rate falls. 
C)  demand for money decreases. 
D)  price level falls. 
E)  real interest rate rises.

Question 6

The velocity of circulation is equal to

Accepted Answer

A)  the price level divided by real GDP. 
B)  the price level multiplied by the quantity of money. 
C)  nominal GDP divided by the quantity of money. 
D)  the quantity of money divided by the price level and then multiplied by real GDP. 
E)  the quantity of money divided by nominal GDP. 
A)  the price level divided by real GDP. 
B)  the price level multiplied by the quantity of money. 
C)  nominal GDP divided by the quantity of money. 
D)  the quantity of money divided by the price level and then multiplied by real GDP. 
E)  the quantity of money divided by nominal GDP.

Question 7

How is the price of a financial asset, such as government bonds, related to the interest rate?

Accepted Answer

The price of financial assets, such as g

Question 8

The demand for money depends on all of the following EXCEPT

Accepted Answer

A)  the nominal interest rate. 
B)  real GDP. 
C)  financial technology. 
D)  the equation of exchange. 
E)  the price level. 
A)  the nominal interest rate. 
B)  real GDP. 
C)  financial technology. 
D)  the equation of exchange. 
E)  the price level.

Question 9

When the Fed increases the quantity of money,

Accepted Answer

A)  the price level immediately increases. 
B)  the price level is slow to change. 
C)  the nominal interest rate immediately increases but the real interest rate does not change. 
D)  real GDP immediately decreases. 
E)  both the nominal interest rate and real interest rate immediately increase. 
A)  the price level immediately increases. 
B)  the price level is slow to change. 
C)  the nominal interest rate immediately increases but the real interest rate does not change. 
D)  real GDP immediately decreases. 
E)  both the nominal interest rate and real interest rate immediately increase.

Question 10

Advances in financial technology

Accepted Answer

A)  must increase the demand for money. 
B)  must decrease the demand for money. 
C)  have no effect on the demand for money or on the supply of money. 
D)  might increase or decrease the demand for money. 
E)  affect only the supply of money. 
A)  must increase the demand for money. 
B)  must decrease the demand for money. 
C)  have no effect on the demand for money or on the supply of money. 
D)  might increase or decrease the demand for money. 
E)  affect only the supply of money.

Question 11

Suppose the quantity of money is $1,000, the velocity of circulation is 6, and real GDP is $4,000.Then the price level is

Accepted Answer

A)  2.5. 
B)  2.0. 
C)  1.5. 
D)  1.1. 
E)  6.0. 
A)  2.5. 
B)  2.0. 
C)  1.5. 
D)  1.1. 
E)  6.0.

Question 12

The difference between the nominal interest rate and the real interest rate is the

Accepted Answer

A)  inflation rate. 
B)  unemployment rate. 
C)  GDP growth rate. 
D)  money growth rate minus the growth rate of real GDP. 
E)  price level. 
A)  inflation rate. 
B)  unemployment rate. 
C)  GDP growth rate. 
D)  money growth rate minus the growth rate of real GDP. 
E)  price level.

Question 13

Which of the following is NOT a cost of inflation?

Accepted Answer

A)  tax costs. 
B)  confusion costs. 
C)  uncertainty costs. 
D)  government spending costs. 
E)  shoe-leather costs. 
A)  tax costs. 
B)  confusion costs. 
C)  uncertainty costs. 
D)  government spending costs. 
E)  shoe-leather costs.

Question 14

Using the quantity theory of money, in the long run a 3 percent increase in the quantity of money leads to a 3 percent

Accepted Answer

A)  increase in the price level. 
B)  increase in the real interest rate. 
C)  decrease in the price level. 
D)  decrease in the real interest rate. 
E)  increase in real GDP. 
A)  increase in the price level. 
B)  increase in the real interest rate. 
C)  decrease in the price level. 
D)  decrease in the real interest rate. 
E)  increase in real GDP.

Question 15

Which of the following increases the quantity of money demanded?

Accepted Answer

A)  a rise in the nominal interest rate 
B)  a rise in the inflation rate 
C)  a rise in the real interest rate 
D)  a fall in the nominal interest rate 
E)  an increase in real GDP 
A)  a rise in the nominal interest rate 
B)  a rise in the inflation rate 
C)  a rise in the real interest rate 
D)  a fall in the nominal interest rate 
E)  an increase in real GDP

Question 16

The supply of money curve is

Accepted Answer

A)  upward sloping, showing the influence of the interest rate. 
B)  horizontal because interest rates are fixed at any one moment. 
C)  vertical because the quantity of money is fixed at any one moment. 
D)  downward sloping, showing the negative influence of the interest rate. 
E)  horizontal because the Fed controls the quantity of money supplied. 
A)  upward sloping, showing the influence of the interest rate. 
B)  horizontal because interest rates are fixed at any one moment. 
C)  vertical because the quantity of money is fixed at any one moment. 
D)  downward sloping, showing the negative influence of the interest rate. 
E)  horizontal because the Fed controls the quantity of money supplied.

Question 17

The increased use of credit cards leads to

Accepted Answer

A)  a rightward shift in the demand for money curve. 
B)  a movement upward along the demand for money curve. 
C)  a leftward shift in the demand for money curve. 
D)  a movement downward along the demand for money curve. 
E)  no movement along the demand curve for money nor a shift in the demand curve. 
A)  a rightward shift in the demand for money curve. 
B)  a movement upward along the demand for money curve. 
C)  a leftward shift in the demand for money curve. 
D)  a movement downward along the demand for money curve. 
E)  no movement along the demand curve for money nor a shift in the demand curve.

Question 18

High inflation

Accepted Answer

A)  leads to a more correct allocation of resources. 
B)  lowers the price level. 
C)  decreases uncertainty. 
D)  makes it easier to use money as a standard of account. 
E)  makes money function less well as a store of value. 
A)  leads to a more correct allocation of resources. 
B)  lowers the price level. 
C)  decreases uncertainty. 
D)  makes it easier to use money as a standard of account. 
E)  makes money function less well as a store of value.

Question 19

The quantity theory of money is a proposition about

Accepted Answer

A)  the Fed's methods used to change the quantity of money. 
B)  nominal and real interest rates. 
C)  the relationship between a change in the quantity of money and the price level. 
D)  the relationship between financial assets and currency demanded. 
E)  the nominal interest rate and the quantity of money demanded. 
A)  the Fed's methods used to change the quantity of money. 
B)  nominal and real interest rates. 
C)  the relationship between a change in the quantity of money and the price level. 
D)  the relationship between financial assets and currency demanded. 
E)  the nominal interest rate and the quantity of money demanded.

Question 20

In the demand and supply model of the money market, the i. supply of money curve is a vertical straight line.
Ii) supply of money is the quantity that must be held by households and firms.
Iii) quantity of money is determined by Fed actions.

Accepted Answer

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

The "shoe-leather costs" of inflation are the costs from

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

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

If the price level is 2, real GDP is $50 billion, and the quantity of money is $4 billion, then velocity is

In the long run, when the Fed increases the quantity of money, the

The velocity of circulation is equal to

How is the price of a financial asset, such as government bonds, related to the interest rate?

The demand for money depends on all of the following EXCEPT

When the Fed increases the quantity of money,

Advances in financial technology

Suppose the quantity of money is $1,000, the velocity of circulation is 6, and real GDP is $4,000.Then the price level is

The difference between the nominal interest rate and the real interest rate is the

Which of the following is NOT a cost of inflation?

Using the quantity theory of money, in the long run a 3 percent increase in the quantity of money leads to a 3 percent

Which of the following increases the quantity of money demanded?

The supply of money curve is

The increased use of credit cards leads to

High inflation

The quantity theory of money is a proposition about

In the demand and supply model of the money market, the i. supply of money curve is a vertical straight line. Ii) supply of money is the quantity that must be held by households and firms. Iii) quantity of money is determined by Fed actions.

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

The "shoe-leather costs" of inflation are the costs from

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

According to the quantity theory of money, what is the effect of an increase in the quantity of money?

If the price level is 2, real GDP is $50 billion, and the quantity of money is $4 billion, then velocity is

In the long run, when the Fed increases the quantity of money, the

The velocity of circulation is equal to

How is the price of a financial asset, such as government bonds, related to the interest rate?

The demand for money depends on all of the following EXCEPT

When the Fed increases the quantity of money,

Advances in financial technology

Suppose the quantity of money is $1,000, the velocity of circulation is 6, and real GDP is $4,000.Then the price level is

The difference between the nominal interest rate and the real interest rate is the

Which of the following is NOT a cost of inflation?

Using the quantity theory of money, in the long run a 3 percent increase in the quantity of money leads to a 3 percent

Which of the following increases the quantity of money demanded?

The supply of money curve is

The increased use of credit cards leads to

High inflation

The quantity theory of money is a proposition about

In the demand and supply model of the money market, the i. supply of money curve is a vertical straight line. Ii) supply of money is the quantity that must be held by households and firms. Iii) quantity of money is determined by Fed actions.

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