Question 1

Which statement best characterizes the inflation tax?

Accepted Answer

A)  The inflation tax transfers wealth from the government to households. 
B)  The inflation tax is the increase in income taxes due to lack of indexation. 
C)  The inflation tax is a tax on everyone who holds money. 
D)  The inflation tax is illegal. 
A)  The inflation tax transfers wealth from the government to households. 
B)  The inflation tax is the increase in income taxes due to lack of indexation. 
C)  The inflation tax is a tax on everyone who holds money. 
D)  The inflation tax is illegal.

Question 2

In the long run,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 3

Which of the following best defines menu costs?

Accepted Answer

A)  resources used by people to maintain lower money holdings when inflation is high 
B)  costs associated with resource misallocation. 
C)  the distortion in incentives created by inflation when taxes do not adjust for inflation 
D)  the cost of more frequent price changes induced by higher inflation 
A)  resources used by people to maintain lower money holdings when inflation is high 
B)  costs associated with resource misallocation. 
C)  the distortion in incentives created by inflation when taxes do not adjust for inflation 
D)  the cost of more frequent price changes induced by higher inflation

Question 4

What kind of economic variables are the interest rates when adjusted for the effects of inflation?

Accepted Answer

A)  nominal 
B)  real 
C)  stock 
D)  flow 
A)  nominal 
B)  real 
C)  stock 
D)  flow

Question 5

Figure 11-1  
-Refer to the Figure 11-1.If the current money supply is located at MS1 and the value of money is 2,what is the excess demand or supply?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 6

If P represents the price of goods and services measured in money,then 1 / P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 7

Use a money supply and demand diagram to answer the following problem: In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis,draw a money demand curve and explain its shape.Do the same for the money supply curve.

Accepted Answer

See Figure 11.1 in the textbook.The mone

Question 8

Which statement best describes the evolution of inflation in Canada?

Accepted Answer

A)  It has been relatively constant over the past 70 years. 
B)  The inflation rate was constant at 7 percent annually for most of the twentieth century. 
C)  During the 1990s,prices rose at an average rate of 2 percent per year. 
D)  During the 1970s,there was deflation. 
A)  It has been relatively constant over the past 70 years. 
B)  The inflation rate was constant at 7 percent annually for most of the twentieth century. 
C)  During the 1990s,prices rose at an average rate of 2 percent per year. 
D)  During the 1970s,there was deflation.

Question 9

What does the classical theory of inflation try to explain?

Accepted Answer

A)  changes in relative prices in the economy determined by factors other than inflation 
B)  the effect of inflation on economic growth and political stability 
C)  the short-run determinants of the price level and the inflation rate 
D)  the long-run determinants of the price level and the inflation rate 
A)  changes in relative prices in the economy determined by factors other than inflation 
B)  the effect of inflation on economic growth and political stability 
C)  the short-run determinants of the price level and the inflation rate 
D)  the long-run determinants of the price level and the inflation rate

Question 10

Define each of the symbols and explain the meaning of M × V = P × Y.

Accepted Answer

M is the quantity of money,V is the velo

Question 11

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the long-run effects of an increase in money supply?

Accepted Answer

A)  The price level and the quantity of money demanded increases. 
B)  The price level increases,but the quantity of money demanded decreases. 
C)  The price level decreases,but the quantity of money demanded increases. 
D)  The price level and the quantity of money demanded decreases. 
A)  The price level and the quantity of money demanded increases. 
B)  The price level increases,but the quantity of money demanded decreases. 
C)  The price level decreases,but the quantity of money demanded increases. 
D)  The price level and the quantity of money demanded decreases.

Question 12

According to the classical dichotomy,what changes nominal variables? What changes real variables?

Accepted Answer

The classical dichotomy argues that nomi

Question 13

Under which condition is wealth distributed from debtors to creditors?

Accepted Answer

A)  when inflation is high,but expected 
B)  when inflation is low,but expected 
C)  when inflation is unexpectedly high 
D)  when inflation is unexpectedly low 
A)  when inflation is high,but expected 
B)  when inflation is low,but expected 
C)  when inflation is unexpectedly high 
D)  when inflation is unexpectedly low

Question 14

In recent years,Bolivia,Russia,and Turkey have had much higher nominal interest rates than Canada,while Japan has had lower nominal interest rates.What would you predict is true about money growth in these other countries? Why?

Accepted Answer

The Fisher effect says that increases in

Question 15

When prices are falling,what term do economists use?

Accepted Answer

A)  disinflation 
B)  deflation 
C)  contraction 
D)  inflation 
A)  disinflation 
B)  deflation 
C)  contraction 
D)  inflation

Question 16

How is velocity computed?

Accepted Answer

A)  (P × Y) / M 
B)  (P × M) / Y 
C)  (Y × V) / P 
D)  (Y × M) / V 
A)  (P × Y) / M 
B)  (P × M) / Y 
C)  (Y × V) / P 
D)  (Y × M) / V

Question 17

Economists agree that increases in the money supply growth rate increases 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 18

When a graph of the money market is drawn with the value of money on the vertical axis,what will happen if the value of money is below the equilibrium level?

Accepted Answer

A)  The price level will rise. 
B)  The value of money will rise. 
C)  Money demand will shift left. 
D)  Money demand will shift right. 
A)  The price level will rise. 
B)  The value of money will rise. 
C)  Money demand will shift left. 
D)  Money demand will shift right.

Question 19

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest

Question 20

Which statement best describes the impact of open-market purchases by the Bank of Canada?

Accepted Answer

A)  The money supply and the value of money increase. 
B)  The money supply increases,which makes the value of money decrease. 
C)  The money supply and the value of money decrease. 
D)  The money supply decreases,which makes the value of money increase. 
A)  The money supply and the value of money increase. 
B)  The money supply increases,which makes the value of money decrease. 
C)  The money supply and the value of money decrease. 
D)  The money supply decreases,which makes the value of money increase.

Which statement best characterizes the inflation tax?

In the long run,when money is neutral,which of the following increases when the money supply growth rate increases?

Which of the following best defines menu costs?

What kind of economic variables are the interest rates when adjusted for the effects of inflation?

Figure 11-1 -Refer to the Figure 11-1.If the current money supply is located at MS1 and the value of money is 2,what is the excess demand or supply?

If P represents the price of goods and services measured in money,then 1 / P is the value of money measured in terms of goods and services.

Use a money supply and demand diagram to answer the following problem: In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis,draw a money demand curve and explain its shape.Do the same for the money supply curve.

Which statement best describes the evolution of inflation in Canada?

What does the classical theory of inflation try to explain?

Define each of the symbols and explain the meaning of M × V = P × Y.

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the long-run effects of an increase in money supply?

According to the classical dichotomy,what changes nominal variables? What changes real variables?

Under which condition is wealth distributed from debtors to creditors?

In recent years,Bolivia,Russia,and Turkey have had much higher nominal interest rates than Canada,while Japan has had lower nominal interest rates.What would you predict is true about money growth in these other countries? Why?

When prices are falling,what term do economists use?

How is velocity computed?

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

When a graph of the money market is drawn with the value of money on the vertical axis,what will happen if the value of money is below the equilibrium level?

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Which statement best describes the impact of open-market purchases by the Bank of 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

Which statement best characterizes the inflation tax?

In the long run,when money is neutral,which of the following increases when the money supply growth rate increases?

Which of the following best defines menu costs?

What kind of economic variables are the interest rates when adjusted for the effects of inflation?

Figure 11-1 -Refer to the Figure 11-1.If the current money supply is located at MS1 and the value of money is 2,what is the excess demand or supply?

If P represents the price of goods and services measured in money,then 1 / P is the value of money measured in terms of goods and services.

Use a money supply and demand diagram to answer the following problem: In a diagram having the value of money on the vertical axis and the quantity of money on the horizontal axis,draw a money demand curve and explain its shape.Do the same for the money supply curve.

Which statement best describes the evolution of inflation in Canada?

What does the classical theory of inflation try to explain?

Define each of the symbols and explain the meaning of M × V = P × Y.

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the long-run effects of an increase in money supply?

According to the classical dichotomy,what changes nominal variables? What changes real variables?

Under which condition is wealth distributed from debtors to creditors?

In recent years,Bolivia,Russia,and Turkey have had much higher nominal interest rates than Canada,while Japan has had lower nominal interest rates.What would you predict is true about money growth in these other countries? Why?

When prices are falling,what term do economists use?

How is velocity computed?

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

When a graph of the money market is drawn with the value of money on the vertical axis,what will happen if the value of money is below the equilibrium level?

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Which statement best describes the impact of open-market purchases by the Bank of 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