Question 1

You bought some shares of stock and,over the next year,the price per share increased by 5 percent,as did the price level.Before taxes,you experienced

Accepted Answer

A)  both a nominal gain and a real gain,and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain,and you paid taxes only on the real gain. 
C)  a nominal gain,but no real gain,and you paid taxes on the nominal gain. 
D)  a nominal gain,but no real gain,and you paid no taxes on the transaction. 
A)  both a nominal gain and a real gain,and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain,and you paid taxes only on the real gain. 
C)  a nominal gain,but no real gain,and you paid taxes on the nominal gain. 
D)  a nominal gain,but no real gain,and you paid no taxes on the transaction.

Question 2

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Accepted Answer

A)  decrease that benefited creditors at the expense of debtors. 
B)  decrease that benefited debtors at the expense of creditors. 
C)  increase that benefited creditors at the expense of debtors. 
D)  increase that benefited debtors at the expense of creditors. 
A)  decrease that benefited creditors at the expense of debtors. 
B)  decrease that benefited debtors at the expense of creditors. 
C)  increase that benefited creditors at the expense of debtors. 
D)  increase that benefited debtors at the expense of creditors.

Question 3

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

Accepted Answer

A)  increases,so the quantity of money demanded increases. 
B)  increases,so the quantity of money demanded decreases. 
C)  decreases,so the quantity of money demanded decreases. 
D)  decreases,so the quantity of money demanded increases. 
A)  increases,so the quantity of money demanded increases. 
B)  increases,so the quantity of money demanded decreases. 
C)  decreases,so the quantity of money demanded decreases. 
D)  decreases,so the quantity of money demanded increases.

Question 4

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.Suppose the relevant money-demand curve is the one labeled MD1;also suppose the velocity of money is 3.If the money market is in equilibrium,then the economy's real GDP amounts to

Accepted Answer

A)  5,000. 
B)  7,500. 
C)  10,000. 
D)  15,000. 
A)  5,000. 
B)  7,500. 
C)  10,000. 
D)  15,000.

Question 5

If velocity = 3.5,the quantity of money = 15,000,and the price level = 1.2,then the real value of output is

Accepted Answer

A)  3,571.43. 
B)  4,285.71. 
C)  5,142.86. 
D)  43,750.00. 
A)  3,571.43. 
B)  4,285.71. 
C)  5,142.86. 
D)  43,750.00.

Question 6

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.At the end of 2007 the relevant money-demand curve was the one labeled MD2.At the end of 2008 the relevant money-demand curve was the one labeled MD1.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2008?

Accepted Answer

A)  -43 percent 
B)  -57 percent 
C)  57 percent 
D)  75 percent 
A)  -43 percent 
B)  -57 percent 
C)  57 percent 
D)  75 percent

Question 7

If there is inflation,then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)  high relative price.Relative-price variability rises as the inflation rate rises. 
B)  high relative price.Relative-price variability falls as the inflation rate rises. 
C)  low relative price.Relative-price variability rises as the inflation rate rises. 
D)  low relative price.Relative-price variability falls as the inflation rate rises. 
A)  high relative price.Relative-price variability rises as the inflation rate rises. 
B)  high relative price.Relative-price variability falls as the inflation rate rises. 
C)  low relative price.Relative-price variability rises as the inflation rate rises. 
D)  low relative price.Relative-price variability falls as the inflation rate rises.

Question 8

The price level falls.This might be because the Federal Reserve

Accepted Answer

A)  bought bonds which raised the money supply. 
B)  bought bonds which reduced the money supply. 
C)  sold bonds which raised the money supply. 
D)  sold bonds which reduced the money supply. 
A)  bought bonds which raised the money supply. 
B)  bought bonds which reduced the money supply. 
C)  sold bonds which raised the money supply. 
D)  sold bonds which reduced the money supply.

Question 9

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Accepted Answer

A)  the money supply must have increased,perhaps because the Fed bought bonds. 
B)  the money supply must have increased,perhaps because the Fed sold bonds. 
C)  the money supply must have decreased,perhaps because the Fed bought bonds. 
D)  the money supply must have decreased,perhaps because the Fed sold bonds. 
A)  the money supply must have increased,perhaps because the Fed bought bonds. 
B)  the money supply must have increased,perhaps because the Fed sold bonds. 
C)  the money supply must have decreased,perhaps because the Fed bought bonds. 
D)  the money supply must have decreased,perhaps because the Fed sold bonds.

Question 10

The supply of money increases when

Accepted Answer

A)  the value of money increases. 
B)  the interest rate increases. 
C)  the Fed makes open-market purchases. 
D)  None of the above is correct. 
A)  the value of money increases. 
B)  the interest rate increases. 
C)  the Fed makes open-market purchases. 
D)  None of the above is correct.

Question 11

The price level is a

Accepted Answer

A)  relative variable. 
B)  dichotomous variable 
C)  real variable. 
D)  nominal variable. 
A)  relative variable. 
B)  dichotomous variable 
C)  real variable. 
D)  nominal variable.

Question 12

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 13

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)  None of the above is correct. 
A)  the nominal wage divided by the price level 
B)  real output 
C)  real interest rates 
D)  None of the above is correct.

Question 14

Which of the following is not correct?

Accepted Answer

A)  The inflation rate is measured as the percentage change in a price index. 
B)  For the last 40 or so years,U.S.inflation hasn't shown much variation from its average rate of about 2 percent. 
C)  During the 19th century there were long periods of falling prices. 
D)  Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes. 
A)  The inflation rate is measured as the percentage change in a price index. 
B)  For the last 40 or so years,U.S.inflation hasn't shown much variation from its average rate of about 2 percent. 
C)  During the 19th century there were long periods of falling prices. 
D)  Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes.

Question 15

People go to the bank more frequently to reduce currency holdings when inflation is high.The sacrifice of time and convenience that is involved in doing that is referred to as

Accepted Answer

A)  inflation-induced tax distortion. 
B)  relative-price-variability cost. 
C)  shoeleather cost. 
D)  menu cost. 
A)  inflation-induced tax distortion. 
B)  relative-price-variability cost. 
C)  shoeleather cost. 
D)  menu cost.

Question 16

When the money market is drawn with the value of money on the vertical axis,the value of money increases 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 17

Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

Accepted Answer

A) True 
 B)False

Question 18

According to the quantity equation,if P = 1.5,Y = 6,000,and M = 4,000,then V =

Accepted Answer

A)  2.25. 
B)  3.00. 
C)  6.50. 
D)  None of the above is correct. 
A)  2.25. 
B)  3.00. 
C)  6.50. 
D)  None of the above is correct.

Question 19

Last year,Tealandia produced 50,000 bags of green tea,and tea was the only good Tealandia produced.Each bag sold at 4 units each of Tealandia's currency - the Leaf.Tealandia's money supply was 40,000.What was the velocity of money in Tealandia?

Accepted Answer

A)  20 
B)  5 
C)  1/20 
D)  1/5 
A)  20 
B)  5 
C)  1/20 
D)  1/5

Question 20

As the price level falls,the value of money falls.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

You bought some shares of stock and,over the next year,the price per share increased by 5 percent,as did the price level.Before taxes,you experienced

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

If velocity = 3.5,the quantity of money = 15,000,and the price level = 1.2,then the real value of output is

If there is inflation,then a firm that has kept its price fixed for some time will have a

The price level falls.This might be because the Federal Reserve

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

The supply of money increases when

The price level is a

The source of all four classic hyperinflations was high rates of money growth.

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

Which of the following is not correct?

People go to the bank more frequently to reduce currency holdings when inflation is high.The sacrifice of time and convenience that is involved in doing that is referred to as

When the money market is drawn with the value of money on the vertical axis,the value of money increases if

Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

According to the quantity equation,if P = 1.5,Y = 6,000,and M = 4,000,then V =

Last year,Tealandia produced 50,000 bags of green tea,and tea was the only good Tealandia produced.Each bag sold at 4 units each of Tealandia's currency - the Leaf.Tealandia's money supply was 40,000.What was the velocity of money in Tealandia?

As the price level falls,the value of money falls.

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

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