Question 1

If V and M are constant,and Y doubles,the quantity equation implies that the price level

Accepted Answer

A)  falls to half its original level. 
B)  does not change. 
C)  doubles. 
D)  more than doubles. 
A)  falls to half its original level. 
B)  does not change. 
C)  doubles. 
D)  more than doubles.

Question 2

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 3

The costs of changing price tags and price listings are known as

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 4

Which of the following is correct? Inflation

Accepted Answer

A)  impedes financial markets in their role of allocating resources. 
B)  reduces the purchasing power of the average consumer. 
C)  generally increases after-tax real interest rates. 
D)  is most costly when anticipated. 
A)  impedes financial markets in their role of allocating resources. 
B)  reduces the purchasing power of the average consumer. 
C)  generally increases after-tax real interest rates. 
D)  is most costly when anticipated.

Question 5

Money demand refers to

Accepted Answer

A)  the total quantity of financial assets that people want to hold. 
B)  how much income people want to earn per year. 
C)  how much wealth people want to hold in liquid form. 
D)  how much currency the Federal Reserve decides to print. 
A)  the total quantity of financial assets that people want to hold. 
B)  how much income people want to earn per year. 
C)  how much wealth people want to hold in liquid form. 
D)  how much currency the Federal Reserve decides to print.

Question 6

Figure 30-1  
-Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)  the equilibrium value of money decreases. 
B)  the equilibrium price level decreases. 
C)  the supply of money has decreased. 
D)  the demand for goods and services will decrease. 
A)  the equilibrium value of money decreases. 
B)  the equilibrium price level decreases. 
C)  the supply of money has decreased. 
D)  the demand for goods and services will decrease.

Question 7

List and define any two of the costs of high inflation.

Accepted Answer

The costs include:
Shoeleather costs: th

Question 8

If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?

Accepted Answer

A)  lenders and people holding a lot of currency 
B)  lenders but not people holding a lot of currency 
C)  people holding a lot of currency but not lenders 
D)  neither lenders nor people holding a lot of currency 
A)  lenders and people holding a lot of currency 
B)  lenders but not people holding a lot of currency 
C)  people holding a lot of currency but not lenders 
D)  neither lenders nor people holding a lot of currency

Question 9

The term hyperinflation refers to

Accepted Answer

A)  the spread of inflation from one country to others. 
B)  a decrease in the inflation rate. 
C)  a period of very high inflation. 
D)  inflation accompanied by a recession. 
A)  the spread of inflation from one country to others. 
B)  a decrease in the inflation rate. 
C)  a period of very high inflation. 
D)  inflation accompanied by a recession.

Question 10

According to the quantity theory of money,a 2 percent increase in the money supply

Accepted Answer

A)  causes the price level to fall by 2 percent. 
B)  leaves the price level unchanged. 
C)  causes the price level to rise by less than 2 percent. 
D)  causes the price level to rise by 2 percent. 
A)  causes the price level to fall by 2 percent. 
B)  leaves the price level unchanged. 
C)  causes the price level to rise by less than 2 percent. 
D)  causes the price level to rise by 2 percent.

Question 11

Suppose the nominal interest rate is 5 percent;the tax rate on interest income is 30 percent,and the after-tax real interest rate is 0.8 percent.Then the inflation rate is 2.7 percent.

Accepted Answer

A) True 
 B)False

Question 12

When the money market is drawn with the value of money on the vertical axis,the price level decreases if

Accepted Answer

A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right. 
A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right.

Question 13

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Accepted Answer

A)  inflation,nominal interest rates,and real interest rates. 
B)  inflation and nominal interest rates,but does not change real interest rates. 
C)  inflation and real interest rates,but does not change nominal interest rates. 
D)  neither inflation,nominal interest rates,or real interest rates. 
A)  inflation,nominal interest rates,and real interest rates. 
B)  inflation and nominal interest rates,but does not change real interest rates. 
C)  inflation and real interest rates,but does not change nominal interest rates. 
D)  neither inflation,nominal interest rates,or real interest rates.

Question 14

In the U.S. ,people are required to pay taxes on

Accepted Answer

A)  nominal interest earnings,irrespective of their real interest earnings. 
B)  real interest earnings,irrespective of their nominal interest earnings. 
C)  real capital gains,irrespective of their nominal capital gains. 
D)  All of the above are correct. 
A)  nominal interest earnings,irrespective of their real interest earnings. 
B)  real interest earnings,irrespective of their nominal interest earnings. 
C)  real capital gains,irrespective of their nominal capital gains. 
D)  All of the above are correct.

Question 15

Economic variables whose values are measured in goods are called

Accepted Answer

A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables. 
A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables.

Question 16

If velocity and output were nearly constant,then

Accepted Answer

A)  the inflation rate would be much higher than the money supply growth rate. 
B)  the inflation rate would be about the same as the money supply growth rate. 
C)  the inflation rate would be much lower than the money supply growth rate. 
D)  any of the above would be possible. 
A)  the inflation rate would be much higher than the money supply growth rate. 
B)  the inflation rate would be about the same as the money supply growth rate. 
C)  the inflation rate would be much lower than the money supply growth rate. 
D)  any of the above would be possible.

Question 17

When deciding how much to save,people care most about

Accepted Answer

A)  after-tax nominal interest rates. 
B)  after-tax real interest rates. 
C)  before-tax real interest rates. 
D)  before-tax nominal interest rates. 
A)  after-tax nominal interest rates. 
B)  after-tax real interest rates. 
C)  before-tax real interest rates. 
D)  before-tax nominal interest rates.

Question 18

Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Accepted Answer

A)  People who held money would feel poorer. 
B)  Prices would rise. 
C)  People who had lent money at a fixed interest rate would feel poorer. 
D)  All of the above are correct. 
A)  People who held money would feel poorer. 
B)  Prices would rise. 
C)  People who had lent money at a fixed interest rate would feel poorer. 
D)  All of the above are correct.

Question 19

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.  
-Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

Accepted Answer

A)  when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services. 
B)  when the money market is in equilibrium,one unit of goods and services sells for 2 dollars. 
C)  there is an excess demand for money if the value of money in terms of goods and services is 0.375. 
D)  All of the above are correct. 
A)  when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services. 
B)  when the money market is in equilibrium,one unit of goods and services sells for 2 dollars. 
C)  there is an excess demand for money if the value of money in terms of goods and services is 0.375. 
D)  All of the above are correct.

Question 20

According to the classical dichotomy,when the money supply doubles,which of the following also doubles?

Accepted Answer

A)  the price level and nominal wages 
B)  the price level,but not the nominal wage 
C)  the nominal wage,but not the price level 
D)  neither the nominal wage nor the price level 
A)  the price level and nominal wages 
B)  the price level,but not the nominal wage 
C)  the nominal wage,but not the price level 
D)  neither the nominal wage nor the price level

Exam 30: Money Growth and Inflation

If V and M are constant,and Y doubles,the quantity equation implies that the price level

When the value of money is on the vertical axis,an increase in the price level shifts money demand to the right.

The costs of changing price tags and price listings are known as

Which of the following is correct? Inflation

Money demand refers to

Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

List and define any two of the costs of high inflation.

If people had been expecting prices to rise but in fact prices fell,then who among the following would benefit?

The term hyperinflation refers to

According to the quantity theory of money,a 2 percent increase in the money supply

Suppose the nominal interest rate is 5 percent;the tax rate on interest income is 30 percent,and the after-tax real interest rate is 0.8 percent.Then the inflation rate is 2.7 percent.

When the money market is drawn with the value of money on the vertical axis,the price level decreases if

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

In the U.S. ,people are required to pay taxes on

Economic variables whose values are measured in goods are called

If velocity and output were nearly constant,then

When deciding how much to save,people care most about

Suppose the United States unexpectedly decided to pay off its debt by printing new money.Which of the following would happen?

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

According to the classical dichotomy,when the money supply doubles,which of the following also doubles?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD₁,then