Question 1

Becky holds $30,000 as money.After a year during which inflation was 5 percent a year, the inflation tax over that year was

Accepted Answer

A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  $3,000. 
E)  $5. 
A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  $3,000. 
E)  $5.

Question 2

The demand for money increases and the demand for money curve shifts rightward if

Accepted Answer

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

Question 3

Hyperinflation is

Accepted Answer

A)  inflation caused by negative growth in the quantity of money. 
B)  inflation at a rate that exceeds 50 percent a month. 
C)  inflation caused by excessive growth in the demand for money. 
D)  inflation at a rate that exceeds 5 percent a month. 
E)  only theoretical and has never occurred in the real world. 
A)  inflation caused by negative growth in the quantity of money. 
B)  inflation at a rate that exceeds 50 percent a month. 
C)  inflation caused by excessive growth in the demand for money. 
D)  inflation at a rate that exceeds 5 percent a month. 
E)  only theoretical and has never occurred in the real world.

Question 4

"Because the nominal interest rate is the opportunity cost of holding money, the supply curve of money slopes downward." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.Because the n

Question 5

Because the inflation rate is so high Wanda refuses to carry cash.Even though it is a bother, she now goes to the ATM twice as often to get the cash she needs.Wanda's actions are an example of the

Accepted Answer

A)  shoe-leather costs of inflation. 
B)  tax costs of inflation. 
C)  confusion costs of inflation. 
D)  uncertainty costs of inflation. 
E)  tax distorting costs of inflation. 
A)  shoe-leather costs of inflation. 
B)  tax costs of inflation. 
C)  confusion costs of inflation. 
D)  uncertainty costs of inflation. 
E)  tax distorting costs of inflation.

Question 6

What are the costs of inflation?
 Briefly explain each.

Accepted Answer

The costs of inflation are the tax costs

Question 7

Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent.Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is

Accepted Answer

A)  4 percent. 
B)  10 percent. 
C)  3 percent. 
D)  8 percent. 
E)  12 percent. 
A)  4 percent. 
B)  10 percent. 
C)  3 percent. 
D)  8 percent. 
E)  12 percent.

Question 8

In the short run, how does the Fed change the nominal interest rate?

Accepted Answer

The Fed changes the nominal interest rat

Question 9

-In the above figure, if the interest rate is 2 percent per year, the quantity of money demanded is

Accepted Answer

A)  less than the quantity of money supplied and the interest rate will change. 
B)  greater than the quantity of money supplied and the interest rate will change. 
C)  less than the quantity of money supplied and the demand for money curve will shift. 
D)  greater than the quantity of money supplied and the demand for money curve will shift. 
E)  greater than the quantity of money supplied and the supply of money curve will shift. 
A)  less than the quantity of money supplied and the interest rate will change. 
B)  greater than the quantity of money supplied and the interest rate will change. 
C)  less than the quantity of money supplied and the demand for money curve will shift. 
D)  greater than the quantity of money supplied and the demand for money curve will shift. 
E)  greater than the quantity of money supplied and the supply of money curve will shift.

Question 10

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The

Question 11

When the Fed increases the quantity of money, the

Accepted Answer

A)  equilibrium nominal interest rate falls. 
B)  equilibrium nominal interest rate rises. 
C)  demand for money curve shifts rightward. 
D)  supply of money curve shifts leftward. 
E)  demand for money curve shifts leftward. 
A)  equilibrium nominal interest rate falls. 
B)  equilibrium nominal interest rate rises. 
C)  demand for money curve shifts rightward. 
D)  supply of money curve shifts leftward. 
E)  demand for money curve shifts leftward.

Question 12

-In the above figure, if the interest rate is 3 percent per year, the quantity of money demanded is

Accepted Answer

A)  less than the quantity of money supplied and the interest rate will change. 
B)  greater than the quantity of money supplied and the interest rate will change. 
C)  less than the quantity of money supplied and the demand for money curve will shift. 
D)  greater than the quantity of money supplied and the demand for money curve will shift. 
E)  greater than the quantity of money supplied and the supply of money curve will shift. 
A)  less than the quantity of money supplied and the interest rate will change. 
B)  greater than the quantity of money supplied and the interest rate will change. 
C)  less than the quantity of money supplied and the demand for money curve will shift. 
D)  greater than the quantity of money supplied and the demand for money curve will shift. 
E)  greater than the quantity of money supplied and the supply of money curve will shift.

Question 13

The demand for money ________ when the ________.

Accepted Answer

A)  increases; price level increases 
B)  decreases; price level increases 
C)  remains constant; price level increases 
D)  increases; nominal interest rate increases 
E)  increases; supply of money decreases 
A)  increases; price level increases 
B)  decreases; price level increases 
C)  remains constant; price level increases 
D)  increases; nominal interest rate increases 
E)  increases; supply of money decreases

Question 14

One effect of inflation is that it is a tax that redistributes goods and services from

Accepted Answer

A)  government to households. 
B)  investors to savers. 
C)  government to businesses. 
D)  households and businesses to the government. 
E)  businesses to households. 
A)  government to households. 
B)  investors to savers. 
C)  government to businesses. 
D)  households and businesses to the government. 
E)  businesses to households.

Question 15

If real GDP grows by 3 percent, the velocity of circulation does not change, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

Accepted Answer

A)  3 percent. 
B)  0 percent. 
C)  -3 percent. 
D)  -6 percent. 
E)  6 percent. 
A)  3 percent. 
B)  0 percent. 
C)  -3 percent. 
D)  -6 percent. 
E)  6 percent.

Question 16

If the Fed wants to raise the interest rate, in the short run in the money market the Fed

Accepted Answer

A)  decreases the quantity of money. 
B)  increases the quantity of money. 
C)  shifts the demand for money curve leftward. 
D)  shifts the demand for money curve rightward. 
E)  directly raises the interest rate and does nothing to either the supply of money or the demand for money. 
A)  decreases the quantity of money. 
B)  increases the quantity of money. 
C)  shifts the demand for money curve leftward. 
D)  shifts the demand for money curve rightward. 
E)  directly raises the interest rate and does nothing to either the supply of money or the demand for money.

Question 17

Uncertainty costs arise from inflation because inflation makes long-term planning ________ so people respond by ________ investment.

Accepted Answer

A)  more difficult; increasing 
B)  more difficult; decreasing 
C)  less difficult; not changing 
D)  more difficult; not changing 
E)  less difficult; increasing 
A)  more difficult; increasing 
B)  more difficult; decreasing 
C)  less difficult; not changing 
D)  more difficult; not changing 
E)  less difficult; increasing

Question 18

The demand for money schedule shows the ________ relationship between money demand and the nominal interest rate which means that as the ________.

Accepted Answer

A)  negative; nominal interest rate increases, the opportunity cost of holding money increases. 
B)  negative; nominal interest rate increases, the opportunity cost of holding money decreases. 
C)  positive; nominal interest rate increases, the opportunity cost of holding money increases. 
D)  positive; nominal interest rate increases, the opportunity cost of holding money decreases. 
E)  negative; the opportunity cost of holding money increases, the nominal interest rate increases. 
A)  negative; nominal interest rate increases, the opportunity cost of holding money increases. 
B)  negative; nominal interest rate increases, the opportunity cost of holding money decreases. 
C)  positive; nominal interest rate increases, the opportunity cost of holding money increases. 
D)  positive; nominal interest rate increases, the opportunity cost of holding money decreases. 
E)  negative; the opportunity cost of holding money increases, the nominal interest rate increases.

Question 19

In the United States since 1970, the quantity of M1 money people hold as a percentage of GDP has

Accepted Answer

A)  increased. 
B)  decreased. 
C)  remained constant. 
D)  increased at first and the decreased. 
E)  decreased at first and then increased. 
A)  increased. 
B)  decreased. 
C)  remained constant. 
D)  increased at first and the decreased. 
E)  decreased at first and then increased.

Question 20

In the money market, how is the adjustment to equilibrium brought about in the short run and in the long run?

Accepted Answer

In the short run, the nominal interest r

Becky holds $30,000 as money.After a year during which inflation was 5 percent a year, the inflation tax over that year was

The demand for money increases and the demand for money curve shifts rightward if

Hyperinflation is

"Because the nominal interest rate is the opportunity cost of holding money, the supply curve of money slopes downward." Is the previous statement correct or incorrect?

Because the inflation rate is so high Wanda refuses to carry cash.Even though it is a bother, she now goes to the ATM twice as often to get the cash she needs.Wanda's actions are an example of the

What are the costs of inflation? Briefly explain each.

Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent.Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is

In the short run, how does the Fed change the nominal interest rate?

-In the above figure, if the interest rate is 2 percent per year, the quantity of money demanded is

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

When the Fed increases the quantity of money, the

-In the above figure, if the interest rate is 3 percent per year, the quantity of money demanded is

The demand for money when the .

One effect of inflation is that it is a tax that redistributes goods and services from

If real GDP grows by 3 percent, the velocity of circulation does not change, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

If the Fed wants to raise the interest rate, in the short run in the money market the Fed

Uncertainty costs arise from inflation because inflation makes long-term planning so people respond by investment.

The demand for money schedule shows the relationship between money demand and the nominal interest rate which means that as the .

In the United States since 1970, the quantity of M1 money people hold as a percentage of GDP has

In the money market, how is the adjustment to equilibrium brought about in the short run and in the long run?

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

Becky holds $30,000 as money.After a year during which inflation was 5 percent a year, the inflation tax over that year was

The demand for money increases and the demand for money curve shifts rightward if

Hyperinflation is

"Because the nominal interest rate is the opportunity cost of holding money, the supply curve of money slopes downward." Is the previous statement correct or incorrect?

Because the inflation rate is so high Wanda refuses to carry cash.Even though it is a bother, she now goes to the ATM twice as often to get the cash she needs.Wanda's actions are an example of the

What are the costs of inflation? Briefly explain each.

Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent.Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is

In the short run, how does the Fed change the nominal interest rate?

-In the above figure, if the interest rate is 2 percent per year, the quantity of money demanded is

"The velocity of circulation is the average speed with which money is loaned to businesses and households." Is the previous statement correct or incorrect?

When the Fed increases the quantity of money, the

-In the above figure, if the interest rate is 3 percent per year, the quantity of money demanded is

The demand for money ________ when the ________.

One effect of inflation is that it is a tax that redistributes goods and services from

If real GDP grows by 3 percent, the velocity of circulation does not change, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

If the Fed wants to raise the interest rate, in the short run in the money market the Fed

Uncertainty costs arise from inflation because inflation makes long-term planning ________ so people respond by ________ investment.

The demand for money schedule shows the ________ relationship between money demand and the nominal interest rate which means that as the ________.

In the United States since 1970, the quantity of M1 money people hold as a percentage of GDP has

In the money market, how is the adjustment to equilibrium brought about in the short run and in the long run?

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 demand for money when the .

Uncertainty costs arise from inflation because inflation makes long-term planning so people respond by investment.

The demand for money schedule shows the relationship between money demand and the nominal interest rate which means that as the .