Question 1

Which statement best describes the inflation tax?

Accepted Answer

A)  It is an income tax. 
B)  It is a sales tax. 
C)  It is the revenue created when the government prints money. 
D)  It is the revenue created when inflation is low. 
A)  It is an income tax. 
B)  It is a sales tax. 
C)  It is the revenue created when the government prints money. 
D)  It is the revenue created when inflation is low.

Question 2

Alina pays $25 for craft supplies she purchases at the Bargainrama discount store.Which statement accurately identifies the types of variables involved?

Accepted Answer

A)  The $25 is a real variable; the craft supplies is a nominal variable. 
B)  The $25 is a nominal variable; the craft supplies is a real variable. 
C)  Both the $25 and the craft supplies are nominal variables. 
D)  Both the $25 and the craft supplies are real variables. 
A)  The $25 is a real variable; the craft supplies is a nominal variable. 
B)  The $25 is a nominal variable; the craft supplies is a real variable. 
C)  Both the $25 and the craft supplies are nominal variables. 
D)  Both the $25 and the craft supplies are real variables.

Question 3

Casimir purchased one share of Norcet stock for $100 in year 1 and sold that share in year 2 for $200.The inflation rate between year 1 and year 2 was 50 percent.If the capital gains tax is imposed at a rate of 50 percent,what is Casimir's after-tax real capital gain?

Accepted Answer

A)  $0 
B)  $50 
C)  $100 
D)  $200 
A)  $0 
B)  $50 
C)  $100 
D)  $200

Question 4

Suppose that velocity and output are constant,the quantity theory and Fisher effect are correct,the nominal interest rate is 7 percent,and money growth is 3 percent.Which statement is consistent with these facts?

Accepted Answer

A)  The real interest rate is 3 percent,and nominal wages are rising. 
B)  The real interest rate is 3 percent,and real wages are rising. 
C)  The real interest rate is 4 percent,and nominal wages are rising. 
D)  The real interest rate is 10 percent,and real wages are rising. 
A)  The real interest rate is 3 percent,and nominal wages are rising. 
B)  The real interest rate is 3 percent,and real wages are rising. 
C)  The real interest rate is 4 percent,and nominal wages are rising. 
D)  The real interest rate is 10 percent,and real wages are rising.

Question 5

Which statement best explains why governments may prefer an inflation tax to some other kind of tax?

Accepted Answer

A)  The inflation tax is easier to impose. 
B)  The inflation tax reduces inflation. 
C)  The inflation tax falls mainly on high-income individuals. 
D)  The inflation tax reduces the real cost of government expenditure. 
A)  The inflation tax is easier to impose. 
B)  The inflation tax reduces inflation. 
C)  The inflation tax falls mainly on high-income individuals. 
D)  The inflation tax reduces the real cost of government expenditure.

Question 6

In order to maintain stable prices,what must the central bank do?

Accepted Answer

A)  maintain low interest rates 
B)  keep unemployment low 
C)  tightly control the money supply 
D)  sell indexed bonds 
A)  maintain low interest rates 
B)  keep unemployment low 
C)  tightly control the money supply 
D)  sell indexed bonds

Question 7

Given a nominal interest rate of 12 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 3 percent,and the tax rate is 30 percent. 
C)  Inflation is 5 percent,and the tax rate is 20 percent. 
D)  Inflation is 6 percent,and the tax rate is 40 percent. 
A)  Inflation is 2 percent,and the tax rate is 50 percent. 
B)  Inflation is 3 percent,and the tax rate is 30 percent. 
C)  Inflation is 5 percent,and the tax rate is 20 percent. 
D)  Inflation is 6 percent,and the tax rate is 40 percent.

Question 8

According to the quantity equation,if Y and M are constant and V 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

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 10

Which of the following does an increase in the money supply growth rate increase?

Accepted Answer

A)  inflation,nominal interest rates,and real interest rates 
B)  inflation and nominal interest rates,but it does not change real interest rates 
C)  inflation and real interest rates,but it does not change nominal interest rates 
D)  nominal and real interest rates,but it does not change inflation 
A)  inflation,nominal interest rates,and real interest rates 
B)  inflation and nominal interest rates,but it does not change real interest rates 
C)  inflation and real interest rates,but it does not change nominal interest rates 
D)  nominal and real interest rates,but it does not change inflation

Question 11

Explain how inflation affects savings.

Accepted Answer

Inflation discourages savings.Income tax

Question 12

Arnold puts money into an account.One year later,he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods.Which of the following is consistent with these facts?

Accepted Answer

A)  The nominal interest rate was 7 percent,and the inflation rate was 4 percent. 
B)  The nominal interest rate was 7 percent,and the inflation rate was 3 percent. 
C)  The nominal interest rate was 10 percent,and the inflation rate was -4 percent. 
D)  The nominal interest rate was 4 percent,and the inflation rate was -3 percent. 
A)  The nominal interest rate was 7 percent,and the inflation rate was 4 percent. 
B)  The nominal interest rate was 7 percent,and the inflation rate was 3 percent. 
C)  The nominal interest rate was 10 percent,and the inflation rate was -4 percent. 
D)  The nominal interest rate was 4 percent,and the inflation rate was -3 percent.

Question 13

When does the supply of money increase?

Accepted Answer

A)  when the Bank of Canada increases the overnight rate 
B)  when the Bank of Canada makes open-market sales 
C)  when the Bank of Canada makes open-market purchases 
D)  when the Bank of Canada increases the bank rate 
A)  when the Bank of Canada increases the overnight rate 
B)  when the Bank of Canada makes open-market sales 
C)  when the Bank of Canada makes open-market purchases 
D)  when the Bank of Canada increases the bank rate

Question 14

According to the classical dichotomy,when the money supply doubles,what also double(s)?

Accepted Answer

A)  employment 
B)  nominal interest rates 
C)  real interest rates 
D)  the price level 
A)  employment 
B)  nominal interest rates 
C)  real interest rates 
D)  the price level

Question 15

When the money market is drawn with the value of money on the vertical axis,in which situation does the price level increase?

Accepted Answer

A)  if either money demand or money supply shifts right 
B)  if either money demand or money supply shifts left 
C)  if money demand shifts right or money supply shifts left 
D)  if money demand shifts left or money supply shifts right 
A)  if either money demand or money supply shifts right 
B)  if either money demand or money supply shifts left 
C)  if money demand shifts right or money supply shifts left 
D)  if money demand shifts left or money supply shifts right

Question 16

Over the past 70 years,what was the approximate average annual inflation rate?

Accepted Answer

A)  3 percent,implying that prices have increased 12-fold 
B)  4 percent,implying that prices have increased 16-fold 
C)  4 percent,implying that prices have increased 18-fold 
D)  5 percent,implying that prices increased about 18-fold 
A)  3 percent,implying that prices have increased 12-fold 
B)  4 percent,implying that prices have increased 16-fold 
C)  4 percent,implying that prices have increased 18-fold 
D)  5 percent,implying that prices increased about 18-fold

Question 17

Figure 11-1  
-Refer to the Figure 11-1.If the money supply is MS2 and the value of money is 2,how much is the excess demand or supply?

Accepted Answer

A)  There is an excess demand equal to the distance between A and C. 
B)  There is an excess demand equal to the distance between A and B. 
C)  There is an excess supply equal to the distance between A and C. 
D)  There is an excess supply equal to the distance between A and B. 
A)  There is an excess demand equal to the distance between A and C. 
B)  There is an excess demand equal to the distance between A and B. 
C)  There is an excess supply equal to the distance between A and C. 
D)  There is an excess supply equal to the distance between A and B.

Question 18

Canadian prices rose at an average annual rate of about 4 percent over the past 70 years.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  Printing money causes the value of money to rise. 
B)  Printing money imposes a tax on everyone who holds money. 
C)  Printing money increases the real interest rate. 
D)  Printing money lowers the velocity of money. 
A)  Printing money causes the value of money to rise. 
B)  Printing money imposes a tax on everyone who holds money. 
C)  Printing money increases the real interest rate. 
D)  Printing money lowers the velocity of money.

Question 20

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

Accepted Answer

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

Which statement best describes the inflation tax?

Alina pays $25 for craft supplies she purchases at the Bargainrama discount store.Which statement accurately identifies the types of variables involved?

Casimir purchased one share of Norcet stock for $100 in year 1 and sold that share in year 2 for $200.The inflation rate between year 1 and year 2 was 50 percent.If the capital gains tax is imposed at a rate of 50 percent,what is Casimir's after-tax real capital gain?

Suppose that velocity and output are constant,the quantity theory and Fisher effect are correct,the nominal interest rate is 7 percent,and money growth is 3 percent.Which statement is consistent with these facts?

Which statement best explains why governments may prefer an inflation tax to some other kind of tax?

In order to maintain stable prices,what must the central bank do?

Given a nominal interest rate of 12 percent,when would you earn the highest after-tax real interest rate?

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

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.

Which of the following does an increase in the money supply growth rate increase?

Explain how inflation affects savings.

Arnold puts money into an account.One year later,he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods.Which of the following is consistent with these facts?

When does the supply of money increase?

According to the classical dichotomy,when the money supply doubles,what also double(s)?

When the money market is drawn with the value of money on the vertical axis,in which situation does the price level increase?

Over the past 70 years,what was the approximate average annual inflation rate?

Figure 11-1 -Refer to the Figure 11-1.If the money supply is MS2 and the value of money is 2,how much is the excess demand or supply?

Canadian prices rose at an average annual rate of about 4 percent over the past 70 years.

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

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

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 inflation tax?

Alina pays $25 for craft supplies she purchases at the Bargainrama discount store.Which statement accurately identifies the types of variables involved?

Casimir purchased one share of Norcet stock for $100 in year 1 and sold that share in year 2 for $200.The inflation rate between year 1 and year 2 was 50 percent.If the capital gains tax is imposed at a rate of 50 percent,what is Casimir's after-tax real capital gain?

Suppose that velocity and output are constant,the quantity theory and Fisher effect are correct,the nominal interest rate is 7 percent,and money growth is 3 percent.Which statement is consistent with these facts?

Which statement best explains why governments may prefer an inflation tax to some other kind of tax?

In order to maintain stable prices,what must the central bank do?

Given a nominal interest rate of 12 percent,when would you earn the highest after-tax real interest rate?

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

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.

Which of the following does an increase in the money supply growth rate increase?

Explain how inflation affects savings.

Arnold puts money into an account.One year later,he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods.Which of the following is consistent with these facts?

When does the supply of money increase?

According to the classical dichotomy,when the money supply doubles,what also double(s)?

When the money market is drawn with the value of money on the vertical axis,in which situation does the price level increase?

Over the past 70 years,what was the approximate average annual inflation rate?

Figure 11-1 -Refer to the Figure 11-1.If the money supply is MS2 and the value of money is 2,how much is the excess demand or supply?

Canadian prices rose at an average annual rate of about 4 percent over the past 70 years.

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

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

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