Question 1

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela

Question 2

What is inflation positively correlated with?

Accepted Answer

A)  nominal wage growth 
B)  real interest rate 
C)  productivity growth rate 
D)  the price level 
A)  nominal wage growth 
B)  real interest rate 
C)  productivity growth rate 
D)  the price level

Question 3

Greta puts money in a savings account at her bank,earning 3.5 percent.One year later,she takes her money out and notes that while her money was earning interest,prices rose 1.5 percent.How has the amount of goods Greta can buy changed one year later?

Accepted Answer

A)  Greta can buy 3.5 percent more goods. 
B)  Greta can buy 3.5 percent less goods. 
C)  Greta can buy 2 percent more goods. 
D)  Greta can buy 2 percent less goods. 
A)  Greta can buy 3.5 percent more goods. 
B)  Greta can buy 3.5 percent less goods. 
C)  Greta can buy 2 percent more goods. 
D)  Greta can buy 2 percent less goods.

Question 4

How can people avoid the inflation tax?

Accepted Answer

A)  by reducing savings 
B)  by not filing a tax return 
C)  by reducing cash holdings 
D)  by spending less 
A)  by reducing savings 
B)  by not filing a tax return 
C)  by reducing cash holdings 
D)  by spending less

Question 5

In the 1970s,in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.How might the central banks have done this?

Accepted Answer

A)  by selling bonds on the open market,which would have raised the value of money 
B)  by purchasing bonds on the open market,which would have raised the value of money 
C)  by selling bonds on the open market,which would have lowered the value of money 
D)  by purchasing bonds on the open market,which would have lowered the value of money 
A)  by selling bonds on the open market,which would have raised the value of money 
B)  by purchasing bonds on the open market,which would have raised the value of money 
C)  by selling bonds on the open market,which would have lowered the value of money 
D)  by purchasing bonds on the open market,which would have lowered the value of money

Question 6

How are debtors and creditors affected when the economy unexpectedly goes from inflation to deflation?

Accepted Answer

A)  Debtors and creditors would both have reduced real wealth. 
B)  Debtors and creditors would both have increased real wealth. 
C)  Debtors would gain at the expense of creditors. 
D)  Creditors would gain at the expense of debtors. 
A)  Debtors and creditors would both have reduced real wealth. 
B)  Debtors and creditors would both have increased real wealth. 
C)  Debtors would gain at the expense of creditors. 
D)  Creditors would gain at the expense of debtors.

Question 7

According to the classical dichotomy theory,when the money supply doubles,what also doubles?

Accepted Answer

A)  the price level 
B)  the real interest rate 
C)  the inflation rate 
D)  the real income 
A)  the price level 
B)  the real interest rate 
C)  the inflation rate 
D)  the real income

Question 8

According to the quantity equation,if Y doubles,V is constant,and M doubles,what factor does the price level multiply by?

Accepted Answer

A)  1 / 4 
B)  1 / 2 
C)  1 
D)  2 
A)  1 / 4 
B)  1 / 2 
C)  1 
D)  2

Question 9

According to the classical dichotomy,when the money supply doubles,what also doubles?

Accepted Answer

A)  the real prices 
B)  the nominal interest rate 
C)  the real GDP 
D)  the nominal GDP 
A)  the real prices 
B)  the nominal interest rate 
C)  the real GDP 
D)  the nominal GDP

Question 10

When the money market is depicted in a graph with the value of money on the vertical axis,as the price level increases,how does the quantity of money demanded or supplied change?

Accepted Answer

A)  The quantity of money demanded increases. 
B)  The quantity of money demanded decreases. 
C)  The quantity of money supplied increases. 
D)  The quantity of money supplied decreases. 
A)  The quantity of money demanded increases. 
B)  The quantity of money demanded decreases. 
C)  The quantity of money supplied increases. 
D)  The quantity of money supplied decreases.

Question 11

Given a nominal interest rate of 10 percent,when would you earn the highest after-tax real interest rate?

Accepted Answer

A)  Inflation is 2 percent,and the tax rate is 50 percent. 
B)  Inflation is 4 percent,and the tax rate is 40 percent. 
C)  Inflation is 5 percent,and the tax rate is 30 percent. 
D)  Inflation is 6 percent,and the tax rate is 20 percent. 
A)  Inflation is 2 percent,and the tax rate is 50 percent. 
B)  Inflation is 4 percent,and the tax rate is 40 percent. 
C)  Inflation is 5 percent,and the tax rate is 30 percent. 
D)  Inflation is 6 percent,and the tax rate is 20 percent.

Question 12

Figure 11-1  
-Refer to the Figure 11-1.What happens when the money supply curve shifts from MS1 to MS2?

Accepted Answer

A)  The demand for goods and services decreases. 
B)  The economy's ability to produce goods and services increases. 
C)  The equilibrium price level increases. 
D)  The equilibrium value of money increases. 
A)  The demand for goods and services decreases. 
B)  The economy's ability to produce goods and services increases. 
C)  The equilibrium price level increases. 
D)  The equilibrium value of money increases.

Question 13

What do economists think about high and moderate inflation?

Accepted Answer

A)  They agree that neither high inflation nor moderate inflation is very costly. 
B)  They agree that both high and moderate inflation are quite costly 
C)  They agree that high inflation is costly,but they disagree about the costs of moderate inflation. 
D)  They agree that moderate inflation is as costly as high inflation,but they disagree about how to measure those costs. 
A)  They agree that neither high inflation nor moderate inflation is very costly. 
B)  They agree that both high and moderate inflation are quite costly 
C)  They agree that high inflation is costly,but they disagree about the costs of moderate inflation. 
D)  They agree that moderate inflation is as costly as high inflation,but they disagree about how to measure those costs.

Question 14

If the Bank of Canada were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

Accepted Answer

A) True 
 B)False

Question 15

According to the classical dichotomy,what is NOT influenced by monetary factors?

Accepted Answer

A)  the nominal GDP 
B)  the real wage rate 
C)  the price level 
D)  the nominal interest rate 
A)  the nominal GDP 
B)  the real wage rate 
C)  the price level 
D)  the nominal interest rate

Question 16

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

Accepted Answer

A)  real output 
B)  both real and nominal interest rate 
C)  inflation rate 
D)  the price level 
A)  real output 
B)  both real and nominal interest rate 
C)  inflation rate 
D)  the price level

Question 17

What does the shoe leather cost of inflation refer to?

Accepted Answer

A)  the fall in real income associated with inflation 
B)  the time spent searching for low prices when inflation rises 
C)  the waste of resources used to maintain lower money holdings 
D)  the increased cost to the government of printing more money 
A)  the fall in real income associated with inflation 
B)  the time spent searching for low prices when inflation rises 
C)  the waste of resources used to maintain lower money holdings 
D)  the increased cost to the government of printing more money

Question 18

Which event took place in the early 1920s in Germany?

Accepted Answer

A)  deflation that proved detrimental to farmers 
B)  the government limited the size of wage and prices increases in an effort to reduce the rate of inflation 
C)  a sudden,unexpected drop in inflation that hurt borrowers 
D)  an extraordinarily high rate of inflation 
A)  deflation that proved detrimental to farmers 
B)  the government limited the size of wage and prices increases in an effort to reduce the rate of inflation 
C)  a sudden,unexpected drop in inflation that hurt borrowers 
D)  an extraordinarily high rate of inflation

Question 19

Since 1992,at what level has the Bank of Canada successfully maintained the inflation rate?

Accepted Answer

A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  4 percent 
A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  4 percent

Question 20

Which statement best describes the evolution of the price level in Canada?

Accepted Answer

A)  The price level rose at an average annual rate of about 2 percent over the past 70 years. 
B)  The price level has increased about 12-fold over the past 70 years. 
C)  The price level increased in the 1970s at a rate above the average of the past 70 years. 
D)  The price level has never decreased over the past 70 years. 
A)  The price level rose at an average annual rate of about 2 percent over the past 70 years. 
B)  The price level has increased about 12-fold over the past 70 years. 
C)  The price level increased in the 1970s at a rate above the average of the past 70 years. 
D)  The price level has never decreased over the past 70 years.

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

What is inflation positively correlated with?

Greta puts money in a savings account at her bank,earning 3.5 percent.One year later,she takes her money out and notes that while her money was earning interest,prices rose 1.5 percent.How has the amount of goods Greta can buy changed one year later?

How can people avoid the inflation tax?

In the 1970s,in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.How might the central banks have done this?

How are debtors and creditors affected when the economy unexpectedly goes from inflation to deflation?

According to the classical dichotomy theory,when the money supply doubles,what also doubles?

According to the quantity equation,if Y doubles,V is constant,and M doubles,what factor does the price level multiply by?

According to the classical dichotomy,when the money supply doubles,what also doubles?

When the money market is depicted in a graph with the value of money on the vertical axis,as the price level increases,how does the quantity of money demanded or supplied change?

Given a nominal interest rate of 10 percent,when would you earn the highest after-tax real interest rate?

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS1 to MS2?

What do economists think about high and moderate inflation?

If the Bank of Canada were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

According to the classical dichotomy,what is NOT influenced by monetary factors?

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

What does the shoe leather cost of inflation refer to?

Which event took place in the early 1920s in Germany?

Since 1992,at what level has the Bank of Canada successfully maintained the inflation rate?

Which statement best describes the evolution of the price level in Canada?

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

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

What is inflation positively correlated with?

Greta puts money in a savings account at her bank,earning 3.5 percent.One year later,she takes her money out and notes that while her money was earning interest,prices rose 1.5 percent.How has the amount of goods Greta can buy changed one year later?

How can people avoid the inflation tax?

In the 1970s,in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.How might the central banks have done this?

How are debtors and creditors affected when the economy unexpectedly goes from inflation to deflation?

According to the classical dichotomy theory,when the money supply doubles,what also doubles?

According to the quantity equation,if Y doubles,V is constant,and M doubles,what factor does the price level multiply by?

According to the classical dichotomy,when the money supply doubles,what also doubles?

When the money market is depicted in a graph with the value of money on the vertical axis,as the price level increases,how does the quantity of money demanded or supplied change?

Given a nominal interest rate of 10 percent,when would you earn the highest after-tax real interest rate?

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS1 to MS2?

What do economists think about high and moderate inflation?

If the Bank of Canada were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

According to the classical dichotomy,what is NOT influenced by monetary factors?

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

What does the shoe leather cost of inflation refer to?

Which event took place in the early 1920s in Germany?

Since 1992,at what level has the Bank of Canada successfully maintained the inflation rate?

Which statement best describes the evolution of the price level in Canada?

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