Question 1

Which statement best describes the effect of printing money to finance government expenditures on the Canadian economy?

Accepted Answer

A)  It accounts for 10 percent of government revenue. 
B)  It accounts for less than 1 percent of government revenue. 
C)  Printing money imposes a tax on net borrowers. 
D)  Printing money causes the nominal interest rate to decrease. 
A)  It accounts for 10 percent of government revenue. 
B)  It accounts for less than 1 percent of government revenue. 
C)  Printing money imposes a tax on net borrowers. 
D)  Printing money causes the nominal interest rate to decrease.

Question 2

You put money in an account and earn a real interest rate of 10 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real interest rate?

Accepted Answer

A)  1.6 percent 
B)  2.6 percent 
C)  5.6 percent 
D)  7.6 percent 
A)  1.6 percent 
B)  2.6 percent 
C)  5.6 percent 
D)  7.6 percent

Question 3

According to the quantity equation,if V and M are constant and Y doubles,what will happen to the price level?

Accepted Answer

A)  It will fall to half its original level. 
B)  It will not change. 
C)  It will double. 
D)  It will more than double. 
A)  It will fall to half its original level. 
B)  It will not change. 
C)  It will double. 
D)  It will more than double.

Question 4

Velocity in the country of Nemedia is always stable.In 2014,the money supply was $100 billion and real GDP was $300 billion.In 2015,the money supply increased by 10 percent,real GDP increased by 5 percent,and nominal GDP equalled $660 billion.By how much did the price level increase between 2014 and 2015?

Accepted Answer

A)  2.38 percent 
B)  4.76 percent 
C)  9.50 percent 
D)  10.0 percent 
A)  2.38 percent 
B)  4.76 percent 
C)  9.50 percent 
D)  10.0 percent

Question 5

What does the principle of monetary neutrality imply?

Accepted Answer

A)  An increase in the money supply will increase real GDP and the price level. 
B)  An increase in the money supply will increase real GDP,but not the price level. 
C)  An increase in the money supply will increase the price level,but not real GDP. 
D)  An increase in the money supply will increase neither the price level nor real GDP. 
A)  An increase in the money supply will increase real GDP and the price level. 
B)  An increase in the money supply will increase real GDP,but not the price level. 
C)  An increase in the money supply will increase the price level,but not real GDP. 
D)  An increase in the money supply will increase neither the price level nor real GDP.

Question 6

In the 14th century,the Western African Emperor Kankan Musa travelled to Cairo where he gave away much gold,which was in use as a medium of exchange.How would we predict this increase in gold would do to the price level and value of gold in Cairo?

Accepted Answer

A)  raise both the price level and the value of gold in Cairo 
B)  raise the price level,but decrease the value of gold in Cairo 
C)  lower the price level,but increase the value of gold in Cairo 
D)  lower both the price level and the value of gold in Cairo 
A)  raise both the price level and the value of gold in Cairo 
B)  raise the price level,but decrease the value of gold in Cairo 
C)  lower the price level,but increase the value of gold in Cairo 
D)  lower both the price level and the value of gold in Cairo

Question 7

What are the costs of inflation?

Accepted Answer

The costs of inflation include "shoe lea

Question 8

Assuming that velocity is stable,if real GDP grows by 20 percent this year,and if the money supply does not change this year,how much does the price level change by?

Accepted Answer

A)  -20 percent 
B)  -10 percent 
C)  10 percent 
D)  20 percent 
A)  -20 percent 
B)  -10 percent 
C)  10 percent 
D)  20 percent

Question 9

What is the name of the one-for-one adjustment of the nominal interest rate to the inflation rate?

Accepted Answer

A)  the Keynes effect 
B)  the Hume effect 
C)  the Fisher effect 
D)  the Ricardian equivalence effect 
A)  the Keynes effect 
B)  the Hume effect 
C)  the Fisher effect 
D)  the Ricardian equivalence effect

Question 10

For a given real interest rate,which statement best describes the effects of an increase in inflation?

Accepted Answer

A)  Inflation makes the real interest rate decrease,which encourages savings. 
B)  Inflation makes the real interest rate decrease,which discourages savings. 
C)  Inflation makes the real interest rate increase,which encourages savings. 
D)  Inflation makes the real interest rate increase,which discourages savings. 
A)  Inflation makes the real interest rate decrease,which encourages savings. 
B)  Inflation makes the real interest rate decrease,which discourages savings. 
C)  Inflation makes the real interest rate increase,which encourages savings. 
D)  Inflation makes the real interest rate increase,which discourages savings.

Question 11

Given a nominal interest rate of 7 percent,in which of the following cases would you earn the lowest after-tax real interest rate?

Accepted Answer

A)  Inflation is 1 percent,and the tax rate is 10 percent. 
B)  Inflation is 2 percent,and the tax rate is 15 percent. 
C)  Inflation is 3 percent,and the tax rate is 20 percent. 
D)  Inflation is 4 percent,and the tax rate is 25 percent. 
A)  Inflation is 1 percent,and the tax rate is 10 percent. 
B)  Inflation is 2 percent,and the tax rate is 15 percent. 
C)  Inflation is 3 percent,and the tax rate is 20 percent. 
D)  Inflation is 4 percent,and the tax rate is 25 percent.

Question 12

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the money demand function?

Accepted Answer

A)  It slopes upward because at higher prices people want to hold more money. 
B)  It slopes downward because at higher prices people want to hold more money. 
C)  It slopes downward because at higher price people want to hold less money. 
D)  It slopes upward because at higher prices people want to hold less money. 
A)  It slopes upward because at higher prices people want to hold more money. 
B)  It slopes downward because at higher prices people want to hold more money. 
C)  It slopes downward because at higher price people want to hold less money. 
D)  It slopes upward because at higher prices people want to hold less money.

Question 13

Consider the quantity equation MV = PY.Assume that the money market is in equilibrium,where the money supply equals the demand for money,MS = MD = M.Assume also that the velocity of money is constant.In a graph with P on the vertical axis and Y on the horizontal axis,draw the relationship Y(P)implied by the quantity theory.How could this curve be interpreted? How does it change when MS increases?

Accepted Answer

We can re-write the quantity equation Y

Question 14

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

Accepted Answer

A)  Evidence shows that money growth and inflation moved together,which supports the quantity theory. 
B)  Evidence shows that money growth and inflation moved together,which does not support the quantity theory. 
C)  Evidence shows that money growth and inflation did not move closely with each other,which supports the quantity theory. 
D)  Evidence shows that money growth and inflation did not move closely with each other,which does not support the quantity theory. 
A)  Evidence shows that money growth and inflation moved together,which supports the quantity theory. 
B)  Evidence shows that money growth and inflation moved together,which does not support the quantity theory. 
C)  Evidence shows that money growth and inflation did not move closely with each other,which supports the quantity theory. 
D)  Evidence shows that money growth and inflation did not move closely with each other,which does not support the quantity theory.

Question 15

What is the price of an Apple iPhone divided by the price of a Samsung Galaxy smart phone called?

Accepted Answer

A)  a classical variable 
B)  a dichotomous variable 
C)  a nominal variable 
D)  a real variable 
A)  a classical variable 
B)  a dichotomous variable 
C)  a nominal variable 
D)  a real variable

Question 16

What does the evidence gained from studying hyperinflation indicate?

Accepted Answer

A)  The rate of inflation is not closely related to the rate at which the money supply changes. 
B)  Nominal interest rates are independent of the money supply. 
C)  Inflation rates parallel money supply growth rates. 
D)  Inflation rates move in the opposite direction as the growth rate in money supply. 
A)  The rate of inflation is not closely related to the rate at which the money supply changes. 
B)  Nominal interest rates are independent of the money supply. 
C)  Inflation rates parallel money supply growth rates. 
D)  Inflation rates move in the opposite direction as the growth rate in money supply.

Question 17

What is an effect of expected inflation?

Accepted Answer

A)  It increases wages. 
B)  It increases the incentive to save. 
C)  It benefits lenders and borrowers. 
D)  It changes real interest rates. 
A)  It increases wages. 
B)  It increases the incentive to save. 
C)  It benefits lenders and borrowers. 
D)  It changes real interest rates.

Question 18

The quantity theory implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Accepted Answer

A) True 
 B)False

Question 19

A rising price level eliminates an excess supply of money.

Accepted Answer

A) True 
 B)False

Question 20

Assume you buy stock and its price rises just as much as the price level.Before taxes,what have you made?

Accepted Answer

A)  a nominal and real gain,but you pay taxes only on the nominal gain 
B)  a nominal and real gain,but you pay taxes only on the real gain 
C)  a nominal gain,but no real gain,yet you pay taxes on the nominal gain 
D)  a nominal gain,but no real gain,so you pay no taxes on the nominal gain 
A)  a nominal and real gain,but you pay taxes only on the nominal gain 
B)  a nominal and real gain,but you pay taxes only on the real gain 
C)  a nominal gain,but no real gain,yet you pay taxes on the nominal gain 
D)  a nominal gain,but no real gain,so you pay no taxes on the nominal gain

Which statement best describes the effect of printing money to finance government expenditures on the Canadian economy?

You put money in an account and earn a real interest rate of 10 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real interest rate?

According to the quantity equation,if V and M are constant and Y doubles,what will happen to the price level?

What does the principle of monetary neutrality imply?

In the 14th century,the Western African Emperor Kankan Musa travelled to Cairo where he gave away much gold,which was in use as a medium of exchange.How would we predict this increase in gold would do to the price level and value of gold in Cairo?

What are the costs of inflation?

Assuming that velocity is stable,if real GDP grows by 20 percent this year,and if the money supply does not change this year,how much does the price level change by?

What is the name of the one-for-one adjustment of the nominal interest rate to the inflation rate?

For a given real interest rate,which statement best describes the effects of an increase in inflation?

Given a nominal interest rate of 7 percent,in which of the following cases would you earn the lowest after-tax real interest rate?

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the money demand function?

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

What is the price of an Apple iPhone divided by the price of a Samsung Galaxy smart phone called?

What does the evidence gained from studying hyperinflation indicate?

What is an effect of expected inflation?

The quantity theory implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

A rising price level eliminates an excess supply of money.

Assume you buy stock and its price rises just as much as the price level.Before taxes,what have you made?

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 describes the effect of printing money to finance government expenditures on the Canadian economy?

You put money in an account and earn a real interest rate of 10 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real interest rate?

According to the quantity equation,if V and M are constant and Y doubles,what will happen to the price level?

What does the principle of monetary neutrality imply?

In the 14th century,the Western African Emperor Kankan Musa travelled to Cairo where he gave away much gold,which was in use as a medium of exchange.How would we predict this increase in gold would do to the price level and value of gold in Cairo?

What are the costs of inflation?

Assuming that velocity is stable,if real GDP grows by 20 percent this year,and if the money supply does not change this year,how much does the price level change by?

What is the name of the one-for-one adjustment of the nominal interest rate to the inflation rate?

For a given real interest rate,which statement best describes the effects of an increase in inflation?

Given a nominal interest rate of 7 percent,in which of the following cases would you earn the lowest after-tax real interest rate?

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the money demand function?

What does the evidence from hyperinflations indicate with respect to the quantity theory of money?

What is the price of an Apple iPhone divided by the price of a Samsung Galaxy smart phone called?

What does the evidence gained from studying hyperinflation indicate?

What is an effect of expected inflation?

The quantity theory implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

A rising price level eliminates an excess supply of money.

Assume you buy stock and its price rises just as much as the price level.Before taxes,what have you made?

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