Question 1

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 nominal GDP 
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 nominal GDP 
D)  by the change in the price of a specific commodity

Question 2

When and where did hyperinflation occur?

Accepted Answer

A)  during 1880-1896 in the United States 
B)  in post-World War I Germany 
C)  during the 1970s in Canada 
D)  during 1930-1933 in the United States 
A)  during 1880-1896 in the United States 
B)  in post-World War I Germany 
C)  during the 1970s in Canada 
D)  during 1930-1933 in the United States

Question 3

If your salary increased by 8 percent and prices increased by 4 percent,how much did your real wage rise by?

Accepted Answer

A)  3 percent 
B)  4 percent 
C)  6 percent 
D)  8 percent 
A)  3 percent 
B)  4 percent 
C)  6 percent 
D)  8 percent

Question 4

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if:
a.the Bank of Canada increases the money supply.
b.people decide to demand less money at each value of money.

Accepted Answer

a.The Bank of Canada increases the money

Question 5

Which statement 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 6

If velocity and output were nearly constant,the inflation rate would be equal to the money supply growth rate times what factor?

Accepted Answer

A)  -2 
B)  -1 
C)  1 
D)  2 
A)  -2 
B)  -1 
C)  1 
D)  2

Question 7

According to the classical dichotomy,what increases when the money supply increases?

Accepted Answer

A)  the real interest rate 
B)  the real GDP 
C)  the value of money 
D)  the price level 
A)  the real interest rate 
B)  the real GDP 
C)  the value of money 
D)  the price level

Question 8

As the price level decreases,what happens to the value of money?

Accepted Answer

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

Question 9

You put money in an account and earn a real interest rate of 10 percent.Inflation is 4 percent,and your marginal tax rate is 40 percent.What is your after-tax real interest rate?

Accepted Answer

A)  1.8 percent 
B)  2.4 percent 
C)  3.2 percent 
D)  4.4 percent 
A)  1.8 percent 
B)  2.4 percent 
C)  3.2 percent 
D)  4.4 percent

Question 10

What type of variable is the price level?

Accepted Answer

A)  quantitative 
B)  controlled 
C)  real 
D)  nominal 
A)  quantitative 
B)  controlled 
C)  real 
D)  nominal

Question 11

According to the classical dichotomy,what is influenced by monetary factors?

Accepted Answer

A)  real GDP 
B)  investment 
C)  nominal interest rates 
D)  the real wage rate 
A)  real GDP 
B)  investment 
C)  nominal interest rates 
D)  the real wage rate

Question 12

Assume you buy some stock and its price rises less than the price level.What is the result of your purchase?

Accepted Answer

A)  a nominal and real gain 
B)  a nominal and real loss 
C)  a nominal loss and a real gain 
D)  a nominal gain and a real loss 
A)  a nominal and real gain 
B)  a nominal and real loss 
C)  a nominal loss and a real gain 
D)  a nominal gain and a real loss

Question 13

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Accepted Answer

A)  a net gain 
B)  a real interest gain 
C)  a capital gain 
D)  an inflation tax gain 
A)  a net gain 
B)  a real interest gain 
C)  a capital gain 
D)  an inflation tax gain

Question 14

Suppose that the Government of Canada unexpectedly decided to pay off its debt by printing new money.What would happen?

Accepted Answer

A)  People who held money would feel richer. 
B)  Prices who held government bonds would feel richer. 
C)  People who lent money at a fixed interest rate would feel richer. 
D)  People who borrowed money at a fixed interest rate would feel richer. 
A)  People who held money would feel richer. 
B)  Prices who held government bonds would feel richer. 
C)  People who lent money at a fixed interest rate would feel richer. 
D)  People who borrowed money at a fixed interest rate would feel richer.

Question 15

Refer to the following:
a.The central bank of the Republic of Moldova needs to determine by how much to increase the money supply next year,if they estimate an increase in the overall economic activity (real GDP)of 2.5 percent and have a target inflation rate of 4 percent.The velocity of money has been observed to be constant over the past many years.If you were a consultant to the government,what would your advice be?
b.Next year,the National Bank of Moldova wishes to reduce inflation to 2 percent,and estimates an increase in real GDP by 1.5 percent.What should be the change in the money supply?

Accepted Answer

a)Using the approximate formula ÄM / M +

How can inflation be measured?

When and where did hyperinflation occur?

If your salary increased by 8 percent and prices increased by 4 percent,how much did your real wage rise by?

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if: a.the Bank of Canada increases the money supply. b.people decide to demand less money at each value of money.

Which statement best characterizes the effects of monetary policy?

If velocity and output were nearly constant,the inflation rate would be equal to the money supply growth rate times what factor?

According to the classical dichotomy,what increases when the money supply increases?

As the price level decreases,what happens to the value of money?

You put money in an account and earn a real interest rate of 10 percent.Inflation is 4 percent,and your marginal tax rate is 40 percent.What is your after-tax real interest rate?

What type of variable is the price level?

According to the classical dichotomy,what is influenced by monetary factors?

Assume you buy some stock and its price rises less than the price level.What is the result of your purchase?

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Suppose that the Government of Canada unexpectedly decided to pay off its debt by printing new money.What would happen?

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 Small 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

How can inflation be measured?

When and where did hyperinflation occur?

If your salary increased by 8 percent and prices increased by 4 percent,how much did your real wage rise by?

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if: a.the Bank of Canada increases the money supply. b.people decide to demand less money at each value of money.

Which statement best characterizes the effects of monetary policy?

If velocity and output were nearly constant,the inflation rate would be equal to the money supply growth rate times what factor?

According to the classical dichotomy,what increases when the money supply increases?

As the price level decreases,what happens to the value of money?

You put money in an account and earn a real interest rate of 10 percent.Inflation is 4 percent,and your marginal tax rate is 40 percent.What is your after-tax real interest rate?

What type of variable is the price level?

According to the classical dichotomy,what is influenced by monetary factors?

Assume you buy some stock and its price rises less than the price level.What is the result of your purchase?

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Suppose that the Government of Canada unexpectedly decided to pay off its debt by printing new money.What would happen?

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 Small 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