Question 1

Which of the following is accurate?

Accepted Answer

A)  Monetary policy is neutral in both the short run and the long run. 
B)  Though monetary policy is neutral in the long run,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. 
B)  Though monetary policy is neutral in the long run,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 2

On its Website,your bank posts the interest rates it is paying on savings accounts.Those posted rates

Accepted Answer

A)  and a price index are both real variables. 
B)  and a price index are both nominal variables. 
C)  are real variables,and a price index is a nominal variable. 
D)  are nominal variables,and a price index is a real variable 
A)  and a price index are both real variables. 
B)  and a price index are both nominal variables. 
C)  are real variables,and a price index is a nominal variable. 
D)  are nominal variables,and a price index is a real variable

Question 3

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Accepted Answer

A)  The nominal interest rate was 11 percent and the inflation rate was 5 percent. 
B)  The nominal interest rate was 6 percent and the inflation rate was 5 percent. 
C)  The nominal interest rate was 5 percent and the inflation rate was -1 percent. 
D)  None of the above is correct. 
A)  The nominal interest rate was 11 percent and the inflation rate was 5 percent. 
B)  The nominal interest rate was 6 percent and the inflation rate was 5 percent. 
C)  The nominal interest rate was 5 percent and the inflation rate was -1 percent. 
D)  None of the above is correct.

Question 4

If inflation is higher than what was expected,

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 5

The source of hyperinflations is primarily

Accepted Answer

A)  lower output growth. 
B)  continuing declines in velocity. 
C)  increases in money-supply growth. 
D)  continuing increases in money demand. 
A)  lower output growth. 
B)  continuing declines in velocity. 
C)  increases in money-supply growth. 
D)  continuing increases in money demand.

Question 6

According to the classical dichotomy,which of the following is not influenced by monetary factors?

Accepted Answer

A)  the price level 
B)  real GDP 
C)  nominal interest rates 
D)  All of the above are correct. 
A)  the price level 
B)  real GDP 
C)  nominal interest rates 
D)  All of the above are correct.

Question 7

According to the assumptions of the quantity theory of money,if the money supply increases by 5 percent,then

Accepted Answer

A)  nominal and real GDP would rise by 5 percent. 
B)  nominal GDP would rise by 5 percent;real GDP would be unchanged. 
C)  nominal GDP would be unchanged;real GDP would rise by 5 percent. 
D)  neither nominal GDP nor real GDP would change. 
A)  nominal and real GDP would rise by 5 percent. 
B)  nominal GDP would rise by 5 percent;real GDP would be unchanged. 
C)  nominal GDP would be unchanged;real GDP would rise by 5 percent. 
D)  neither nominal GDP nor real GDP would change.

Question 8

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 9

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically,the government in countries th

Question 10

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)  3.4 percent 
B)  1.6 percent 
C)  1.0 percent 
D)  None of the above is correct. 
A)  3.4 percent 
B)  1.6 percent 
C)  1.0 percent 
D)  None of the above is correct.

Question 11

Printing money to finance government expenditures

Accepted Answer

A)  causes the value of money to rise. 
B)  imposes a tax on everyone who holds money. 
C)  is the principal method by which the U.S.government finances its expenditures. 
D)  None of the above is correct. 
A)  causes the value of money to rise. 
B)  imposes a tax on everyone who holds money. 
C)  is the principal method by which the U.S.government finances its expenditures. 
D)  None of the above is correct.

Question 12

Wealth is redistributed from debtors to creditors when inflation was expected to be

Accepted Answer

A)  high and it turns out to be high. 
B)  low and it turns out to be low. 
C)  low and it turns out to be high. 
D)  high and it turns out to be low. 
A)  high and it turns out to be high. 
B)  low and it turns out to be low. 
C)  low and it turns out to be high. 
D)  high and it turns out to be low.

Question 13

When money is neutral,which of the following increases when the money supply growth rate increases?

Accepted Answer

A)  real output growth 
B)  real interest rates 
C)  nominal interest rates 
D)  the money supply divided by the price level 
A)  real output growth 
B)  real interest rates 
C)  nominal interest rates 
D)  the money supply divided by the price level

Question 14

Figure 30-1  
-Refer to Figure 30-1.If the current money supply is MS1,then

Accepted Answer

A)  there is no excess supply or excess demand if the value of money is 2. 
B)  the equilibrium is at point C. 
C)  there is an excess supply of money if the value of money is 1. 
D)  None of the above is correct. 
A)  there is no excess supply or excess demand if the value of money is 2. 
B)  the equilibrium is at point C. 
C)  there is an excess supply of money if the value of money is 1. 
D)  None of the above is correct.

Question 15

You put money into an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)  1.2 percent 
B)  2.8 percent 
C)  4.8 percent 
D)  None of the above is correct. 
A)  1.2 percent 
B)  2.8 percent 
C)  4.8 percent 
D)  None of the above is correct.

Question 16

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

Accepted Answer

A)  and equilibrium quantity of money to increase. 
B)  and equilibrium quantity of money to decrease. 
C)  to increase,while the equilibrium quantity of money decreases. 
D)  to decrease,while the equilibrium quantity of money increases. 
A)  and equilibrium quantity of money to increase. 
B)  and equilibrium quantity of money to decrease. 
C)  to increase,while the equilibrium quantity of money decreases. 
D)  to decrease,while the equilibrium quantity of money increases.

Question 17

As the price level decreases,the value of money

Accepted Answer

A)  increases,so people want to hold more of it. 
B)  increases,so people want to hold less of it. 
C)  decreases,so people want to hold more of it. 
D)  decreases,so people want to hold less of it. 
A)  increases,so people want to hold more of it. 
B)  increases,so people want to hold less of it. 
C)  decreases,so people want to hold more of it. 
D)  decreases,so people want to hold less of it.

Question 18

Most economists believe the principle of monetary neutrality is

Accepted Answer

A)  relevant to both the short and long run. 
B)  irrelevant to both the short and long run. 
C)  mostly relevant to the short run. 
D)  mostly relevant to the long run. 
A)  relevant to both the short and long run. 
B)  irrelevant to both the short and long run. 
C)  mostly relevant to the short run. 
D)  mostly relevant to the long run.

Question 19

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value. 
A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value.

Question 20

In the U.S. ,from the early 1980s through the early 1990s,

Accepted Answer

A)  both inflation and nominal interest rates rose. 
B)  both inflation and nominal interest rates fell. 
C)  the inflation rate fell and the nominal interest rate rose. 
D)  the inflation rate rose and the nominal interest rate fell. 
A)  both inflation and nominal interest rates rose. 
B)  both inflation and nominal interest rates fell. 
C)  the inflation rate fell and the nominal interest rate rose. 
D)  the inflation rate rose and the nominal interest rate fell.

Exam 30: Money Growth and Inflation

Which of the following is accurate?

On its Website,your bank posts the interest rates it is paying on savings accounts.Those posted rates

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

If inflation is higher than what was expected,

The source of hyperinflations is primarily

According to the classical dichotomy,which of the following is not influenced by monetary factors?

According to the assumptions of the quantity theory of money,if the money supply increases by 5 percent,then

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Printing money to finance government expenditures

Wealth is redistributed from debtors to creditors when inflation was expected to be

When money is neutral,which of the following increases when the money supply growth rate increases?

Figure 30-1 -Refer to Figure 30-1.If the current money supply is MS1,then

You put money into an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

As the price level decreases,the value of money

Most economists believe the principle of monetary neutrality is

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

In the U.S. ,from the early 1980s through the early 1990s,

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.If the current money supply is MS₁,then