Question 1

A rising price level eliminates an excess supply of money.

Accepted Answer

A) True 
 B)False

Question 2

Assuming that V is constant, the quantity equation implies that an increase in M could result in which of the following?

Accepted Answer

A) a decrease in the price level 
B) an increase in real GDP 
C) a decrease in nominal GDP 
D) an increase in the price level 
A) a decrease in the price level 
B) an increase in real GDP 
C) a decrease in nominal GDP 
D) an increase in the price level

Question 3

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 4

How can inflation be measured?

Accepted Answer

A) by the change in the consumer price index 
B) by the percentage change in the consumer price index 
C) by the percentage change in the price of a specific commodity 
D) by the change in the price of a specific commodity 
A) by the change in the consumer price index 
B) by the percentage change in the consumer price index 
C) by the percentage change in the price of a specific commodity 
D) by the change in the price of a specific commodity

Question 5

In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis, draw a money demand curve and explain its shape. Do the same for the money supply curve.

Accepted Answer

The money demand curve is downward slopi

Question 6

Which of the following is the immediate and longer-term effect of a decrease in the money supply?

Accepted Answer

A) A decrease in the money supply creates an excess supply of money that is eliminated by rising prices. 
B) A decrease in the money supply creates an excess supply of money that is eliminated by falling prices. 
C) A decrease in the money supply creates an excess demand for money that is eliminated by rising prices. 
D) A decrease in the money supply creates an excess demand for money that is eliminated by falling prices. 
A) A decrease in the money supply creates an excess supply of money that is eliminated by rising prices. 
B) A decrease in the money supply creates an excess supply of money that is eliminated by falling prices. 
C) A decrease in the money supply creates an excess demand for money that is eliminated by rising prices. 
D) A decrease in the money supply creates an excess demand for money that is eliminated by falling prices.

Question 7

The quantity theory of money can explain hyperinflations but not moderate inflation.

Accepted Answer

A) True 
 B)False

Question 8

According to the classical dichotomy, when the money supply doubles, which of the following also double(s)?

Accepted Answer

A) the value of the dollar 
B) nominal interest rates 
C) real interest rates 
D) the price level 
A) the value of the dollar 
B) nominal interest rates 
C) real interest rates 
D) the price level

Question 9

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following would shift money demand to the right?

Accepted Answer

A) an increase in the price level 
B) a decrease in the price level 
C) a decrease in real GDP 
D) an increase in real GDP 
A) an increase in the price level 
B) a decrease in the price level 
C) a decrease in real GDP 
D) an increase in real GDP

Question 10

According to the quantity equation, which of the following best describes the effects of an increase in the money supply?

Accepted Answer

A) If velocity is stable, an increase in the money supply creates a proportional increase in nominal GDP but not in the price level. 
B) If velocity is stable, an increase in the money supply creates a proportional increase in the price level and real GDP. 
C) If velocity is stable, an increase in the money supply creates an increase in the real GDP but not in the price level. 
D) With constant money supply and velocity, an increase in the money supply creates a proportional increase in the price level and nominal GDP 
A) If velocity is stable, an increase in the money supply creates a proportional increase in nominal GDP but not in the price level. 
B) If velocity is stable, an increase in the money supply creates a proportional increase in the price level and real GDP. 
C) If velocity is stable, an increase in the money supply creates an increase in the real GDP but not in the price level. 
D) With constant money supply and velocity, an increase in the money supply creates a proportional increase in the price level and nominal GDP

Question 11

You put money in an account and earn a real interest rate of 8 percent. Inflation is 3 percent, and your marginal tax rate is 20 percent. Which of the following is your after-tax real rate of interest?

Accepted Answer

A) 1.8 percent 
B) 2.8 percent 
C) 3.8 percent 
D) 5.8 percent 
A) 1.8 percent 
B) 2.8 percent 
C) 3.8 percent 
D) 5.8 percent

Question 12

"The introduction of the automated teller machines was equivalent to an increase in money supply." Discuss this assertion.

Accepted Answer

The introduction of the automated teller

Question 13

Which of the following best describes the inflation tax?

Accepted Answer

A) It is a property tax. 
B) It is a sales tax. 
C) It is the revenue created when the government prints money. 
D) It is the revenue created when inflation is low. 
A) It is a property tax. 
B) It is a sales tax. 
C) It is the revenue created when the government prints money. 
D) It is the revenue created when inflation is low.

Question 14

According to which of the following theories are changes in nominal variables determined mostly by the quantity of money and the monetary system?

Accepted Answer

A) both the classical dichotomy and the quantity theory of money 
B) the classical dichotomy, but not the quantity theory of money 
C) the quantity theory of money, but not the classical dichotomy 
D) neither the classical dichotomy nor the quantity theory of money 
A) both the classical dichotomy and the quantity theory of money 
B) the classical dichotomy, but not the quantity theory of money 
C) the quantity theory of money, but not the classical dichotomy 
D) neither the classical dichotomy nor the quantity theory of money

Question 15

Which of the following can a country increase in the long run by increasing its money growth rate?

Accepted Answer

A) the nominal wage divided by the price level 
B) real output 
C) real interest rates 
D) the price level 
A) the nominal wage divided by the price level 
B) real output 
C) real interest rates 
D) the price level

Question 16

When the money market is represented in a diagram with the value of money on the vertical axis, how does the money supply curve shift from an increase in the money supply?

Accepted Answer

A) It shifts to the right, lowering the price level. 
B) It shifts to the right, raising the price level. 
C) It shifts to the left, raising the price level. 
D) It shifts to the left, lowering the price level. 
A) It shifts to the right, lowering the price level. 
B) It shifts to the right, raising the price level. 
C) It shifts to the left, raising the price level. 
D) It shifts to the left, lowering the price level.

Question 17

When the value of money rises, what happens to the number of dollars needed to buy a representative basket of goods?

Accepted Answer

A) It increases, and so the price level rises. 
B) It increases, and so the price level falls. 
C) It decreases, and so the price level rises. 
D) It decreases, and so the price level falls. 
A) It increases, and so the price level rises. 
B) It increases, and so the price level falls. 
C) It decreases, and so the price level rises. 
D) It decreases, and so the price level falls.

Question 18

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

Accepted Answer

A) Evidence shows that money growth and inflation moved together, which supports the quantity theory. 
B) Evidence shows that money growth and inflation moved together, which does not support the quantity theory. 
C) Evidence shows that money growth and inflation did not move closely with each other, which supports the quantity theory. 
D) Evidence shows that money growth and inflation did not move closely with each other, which does not support the quantity theory. 
A) Evidence shows that money growth and inflation moved together, which supports the quantity theory. 
B) Evidence shows that money growth and inflation moved together, which does not support the quantity theory. 
C) Evidence shows that money growth and inflation did not move closely with each other, which supports the quantity theory. 
D) Evidence shows that money growth and inflation did not move closely with each other, which does not support the quantity theory.

Question 19

Which of the following best characterizes the effects of monetary policy?

Accepted Answer

A) Monetary policy is neutral in both the short run and the long run; therefore, it does not affect real variables. 
B) Monetary policy is neutral in the long run, but it may have effects on real variables in the short run. 
C) Monetary policy has profound effects on real variables in both the short run and the long run. 
D) Monetary policy has profound effects on real variables in the long run, but is neutral in the short run. 
A) Monetary policy is neutral in both the short run and the long run; therefore, it does not affect real variables. 
B) Monetary policy is neutral in the long run, but it may have effects on real variables in the short run. 
C) Monetary policy has profound effects on real variables in both the short run and the long run. 
D) Monetary policy has profound effects on real variables in the long run, but is neutral in the short run.

Question 20

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

Accepted Answer

A) It will less than double. 
B) It will double. 
C) It will more than double. 
D) It might double, more than double, or less than double; more information is needed. 
A) It will less than double. 
B) It will double. 
C) It will more than double. 
D) It might double, more than double, or less than double; more information is needed.

A rising price level eliminates an excess supply of money.

Assuming that V is constant, the quantity equation implies that an increase in M could result in which of the following?

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

How can inflation be measured?

In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis, draw a money demand curve and explain its shape. Do the same for the money supply curve.

Which of the following is the immediate and longer-term effect of a decrease in the money supply?

The quantity theory of money can explain hyperinflations but not moderate inflation.

According to the classical dichotomy, when the money supply doubles, which of the following also double(s)?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following would shift money demand to the right?

According to the quantity equation, which of the following best describes the effects of an increase in the money supply?

You put money in an account and earn a real interest rate of 8 percent. Inflation is 3 percent, and your marginal tax rate is 20 percent. Which of the following is your after-tax real rate of interest?

"The introduction of the automated teller machines was equivalent to an increase in money supply." Discuss this assertion.

Which of the following best describes the inflation tax?

According to which of the following theories are changes in nominal variables determined mostly by the quantity of money and the monetary system?

Which of the following can a country increase in the long run by increasing its money growth rate?

When the money market is represented in a diagram with the value of money on the vertical axis, how does the money supply curve shift from an increase in the money supply?

When the value of money rises, what happens to the number of dollars needed to buy a representative basket of goods?

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

Which of the following best characterizes the effects of monetary policy?

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

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

A rising price level eliminates an excess supply of money.

Assuming that V is constant, the quantity equation implies that an increase in M could result in which of the following?

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

How can inflation be measured?

In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis, draw a money demand curve and explain its shape. Do the same for the money supply curve.

Which of the following is the immediate and longer-term effect of a decrease in the money supply?

The quantity theory of money can explain hyperinflations but not moderate inflation.

According to the classical dichotomy, when the money supply doubles, which of the following also double(s)?

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following would shift money demand to the right?

According to the quantity equation, which of the following best describes the effects of an increase in the money supply?

You put money in an account and earn a real interest rate of 8 percent. Inflation is 3 percent, and your marginal tax rate is 20 percent. Which of the following is your after-tax real rate of interest?

"The introduction of the automated teller machines was equivalent to an increase in money supply." Discuss this assertion.

Which of the following best describes the inflation tax?

According to which of the following theories are changes in nominal variables determined mostly by the quantity of money and the monetary system?

Which of the following can a country increase in the long run by increasing its money growth rate?

When the money market is represented in a diagram with the value of money on the vertical axis, how does the money supply curve shift from an increase in the money supply?

When the value of money rises, what happens to the number of dollars needed to buy a representative basket of goods?

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

Which of the following best characterizes the effects of monetary policy?

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

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