Question 1

If inflation is more than expected, how are creditors or debtors affected?

Accepted Answer

A) Creditors receive a lower real interest rate than they had anticipated. 
B) Creditors pay a lower real interest rate than they had anticipated. 
C) Debtors receive a higher real interest rate than they had anticipated. 
D) Debtors pay a higher real interest rate than they had anticipated. 
A) Creditors receive a lower real interest rate than they had anticipated. 
B) Creditors pay a lower real interest rate than they had anticipated. 
C) Debtors receive a higher real interest rate than they had anticipated. 
D) Debtors pay a higher real interest rate than they had anticipated.

Question 2

Which of the following is an effect of expected inflation?

Accepted Answer

A) It does not affect the purchasing power of most workers. 
B) It increases the incentive to save. 
C) It benefits lenders and borrowers. 
D) It changes real interest rates because of the Fischer effect. 
A) It does not affect the purchasing power of most workers. 
B) It increases the incentive to save. 
C) It benefits lenders and borrowers. 
D) It changes real interest rates because of the Fischer effect.

Question 3

Norbert purchased 10 shares of Gentech stock for $200 a share in year 1 and sold all the shares in year 2 for $220 a share. Between year 1 and year 2, the price index increased by 5 percent. The tax on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Norbert pay on his gain?

Accepted Answer

A) $90 
B) $95 
C) $100 
D) $105 
A) $90 
B) $95 
C) $100 
D) $105

Question 4

When people use more resources to reduce their money holdings because of high inflation, this an example of which of the following?

Accepted Answer

A) inflation-induced tax distortions 
B) relative-price variability costs 
C) shoeleather costs 
D) menu costs 
A) inflation-induced tax distortions 
B) relative-price variability costs 
C) shoeleather costs 
D) menu costs

Question 5

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the money demand function?

Accepted Answer

A) It slopes upward because at higher prices people want to hold more money. 
B) It slopes downward because at higher prices people want to hold more money. 
C) It slopes downward because at higher price people want to hold less money. 
D) It slopes upward, because at higher prices people want to hold less money. 
A) It slopes upward because at higher prices people want to hold more money. 
B) It slopes downward because at higher prices people want to hold more money. 
C) It slopes downward because at higher price people want to hold less money. 
D) It slopes upward, because at higher prices people want to hold less money.

Question 6

When does the supply of money increase?

Accepted Answer

A) when the value of money increases 
B) when the price level decreases 
C) when the Bank of Canada makes open-market purchases 
D) when the Bank of Canada increases the bank rate 
A) when the value of money increases 
B) when the price level decreases 
C) when the Bank of Canada makes open-market purchases 
D) when the Bank of Canada increases the bank rate

Question 7

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela

Question 8

An assistant professor of economics gets a $100-a-month raise, but then she figures that with her current monthly salary she can't buy as many goods as she could last year. Which of the following has happened to her real and nominal wage?

Accepted Answer

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

Question 9

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the long run effects of an increase in money supply?

Accepted Answer

A) The price level and the quantity of money demanded increases. 
B) The price level increases, but the quantity of money demanded decreases. 
C) The price level decreases, but the quantity of money demanded increases. 
D) The price level and the quantity of money demanded decreases. 
A) The price level and the quantity of money demanded increases. 
B) The price level increases, but the quantity of money demanded decreases. 
C) The price level decreases, but the quantity of money demanded increases. 
D) The price level and the quantity of money demanded decreases.

Question 10

Which of the following does nominal GDP measure?

Accepted Answer

A) the total quantity of final goods and services produced 
B) the dollar value of the economy's output of final goods and services 
C) the total income received from producing final goods and services in constant dollars 
D) the price level 
A) the total quantity of final goods and services produced 
B) the dollar value of the economy's output of final goods and services 
C) the total income received from producing final goods and services in constant dollars 
D) the price level

Question 11

According to the quantity equation, if V and M are constant, and Y doubles, which of the following will happen to the price level?

Accepted Answer

A) It will fall to half its original level. 
B) It will not change. 
C) It will double. 
D) It will more than double. 
A) It will fall to half its original level. 
B) It will not change. 
C) It will double. 
D) It will more than double.

Question 12

Given a nominal interest rate of 10 percent, in which of the following cases would you earn the highest after-tax real interest rate?

Accepted Answer

A) Inflation is 6 percent, and the tax rate is 20 percent. 
B) Inflation is 5 percent, and the tax rate is 30 percent. 
C) Inflation is 4 percent, and the tax rate is 40 percent. 
D) Inflation is 2 percent, and the tax rate is 50 percent. 
A) Inflation is 6 percent, and the tax rate is 20 percent. 
B) Inflation is 5 percent, and the tax rate is 30 percent. 
C) Inflation is 4 percent, and the tax rate is 40 percent. 
D) Inflation is 2 percent, and the tax rate is 50 percent.

Question 13

If the money supply growth rate permanently increased from 5 percent to 30 percent, which of the following would we expect to happen to inflation?

Accepted Answer

A) It would increase by more than 25 percentage points. 
B) It would increase by 25 percentage points. 
C) It would increase by less than 25 percentage points. 
D) It would decrease by more than 25 percentage points. 
A) It would increase by more than 25 percentage points. 
B) It would increase by 25 percentage points. 
C) It would increase by less than 25 percentage points. 
D) It would decrease by more than 25 percentage points.

If inflation is more than expected, how are creditors or debtors affected?

Which of the following is an effect of expected inflation?

When people use more resources to reduce their money holdings because of high inflation, this an example of which of the following?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the money demand function?

When does the supply of money increase?

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

An assistant professor of economics gets a $100-a-month raise, but then she figures that with her current monthly salary she can't buy as many goods as she could last year. Which of the following has happened to her real and nominal wage?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the long run effects of an increase in money supply?

Which of the following does nominal GDP measure?

According to the quantity equation, if V and M are constant, and Y doubles, which of the following will happen to the price level?

Given a nominal interest rate of 10 percent, in which of the following cases would you earn the highest after-tax real interest rate?

If the money supply growth rate permanently increased from 5 percent to 30 percent, which of the following would we expect to happen to inflation?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 11: Money Growth and Inflation

If inflation is more than expected, how are creditors or debtors affected?

Which of the following is an effect of expected inflation?

When people use more resources to reduce their money holdings because of high inflation, this an example of which of the following?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the money demand function?

When does the supply of money increase?

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

An assistant professor of economics gets a $100-a-month raise, but then she figures that with her current monthly salary she can't buy as many goods as she could last year. Which of the following has happened to her real and nominal wage?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the long run effects of an increase in money supply?

Which of the following does nominal GDP measure?

According to the quantity equation, if V and M are constant, and Y doubles, which of the following will happen to the price level?

Given a nominal interest rate of 10 percent, in which of the following cases would you earn the highest after-tax real interest rate?

If the money supply growth rate permanently increased from 5 percent to 30 percent, which of the following would we expect to happen to inflation?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters