Question 1

In times of financial panic,we expect the velocity of money to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain relatively constant. 
D)  first increase and then decrease. 
A)  increase. 
B)  decrease. 
C)  remain relatively constant. 
D)  first increase and then decrease.

Question 2

When the money supply and the demand for goods increase at the same time:

Accepted Answer

A)  producers understand how to react,but consumers are confused. 
B)  consumers act rationally,but producers cannot read the market signals. 
C)  the government is able to clarify how the markets will be affected. 
D)  both consumers and producers can often become confused. 
A)  producers understand how to react,but consumers are confused. 
B)  consumers act rationally,but producers cannot read the market signals. 
C)  the government is able to clarify how the markets will be affected. 
D)  both consumers and producers can often become confused.

Question 3

The bundle of goods used to calculate the consumer price index remains constant over time.

Accepted Answer

A) True 
 B)False

Question 4

The Fisher effect is the tendency of:

Accepted Answer

A)  real interest rates to rise with expected inflation rates. 
B)  real interest rates to rise with unexpected inflation rates. 
C)  nominal interest rates to rise with expected inflation rates. 
D)  nominal interest rates to rise with unexpected inflation rates. 
A)  real interest rates to rise with expected inflation rates. 
B)  real interest rates to rise with unexpected inflation rates. 
C)  nominal interest rates to rise with expected inflation rates. 
D)  nominal interest rates to rise with unexpected inflation rates.

Question 5

If a lender expects an inflation rate of 5% and asks for a nominal interest rate of 10%,then the lender expects to earn a real interest rate of:

Accepted Answer

A)  2%. 
B)  5%. 
C)  10%. 
D)  15%. 
A)  2%. 
B)  5%. 
C)  10%. 
D)  15%.

Question 6

Compared to the early 1980s,inflation since 1985 has been relatively low.

Accepted Answer

A) True 
 B)False

Question 7

In the long run,money:

Accepted Answer

A)  always increases real GDP. 
B)  will not affect prices. 
C)  will lift the standard of living for everyone in a nation. 
D)  is neutral with respect to quantity produced. 
A)  always increases real GDP. 
B)  will not affect prices. 
C)  will lift the standard of living for everyone in a nation. 
D)  is neutral with respect to quantity produced.

Question 8

Money illusion occurs when people:

Accepted Answer

A)  correctly see changes in nominal prices. 
B)  correctly see changes in real prices. 
C)  see changes in real prices and mistake them for changes in nominal prices. 
D)  see changes in nominal prices and mistake them for changes in real prices. 
A)  correctly see changes in nominal prices. 
B)  correctly see changes in real prices. 
C)  see changes in real prices and mistake them for changes in nominal prices. 
D)  see changes in nominal prices and mistake them for changes in real prices.

Question 9

Inflation hurts the economy because:

Accepted Answer

A)  it raises all prices in the economy. 
B)  it affects the ability of market prices to send signals about the value of resources. 
C)  all can perfectly see the increases in prices. 
D)  higher prices reduce real output. 
A)  it raises all prices in the economy. 
B)  it affects the ability of market prices to send signals about the value of resources. 
C)  all can perfectly see the increases in prices. 
D)  higher prices reduce real output.

Question 10

According to the quantity theory of money,a change in the money supply affects:

Accepted Answer

A)  real GDP in the short run but not in the long run. 
B)  real GDP in the long run but not in the short run. 
C)  nominal GDP in the short run but not in the long run. 
D)  nominal GDP in the long run but not in the short run. 
A)  real GDP in the short run but not in the long run. 
B)  real GDP in the long run but not in the short run. 
C)  nominal GDP in the short run but not in the long run. 
D)  nominal GDP in the long run but not in the short run.

Question 11

A decrease in the inflation rate from 10% to 3% implies that deflation has occurred.

Accepted Answer

A) True 
 B)False

Question 12

Inflation can reduce the real return that lenders receive on their loans,in effect transferring wealth from borrowers to lenders.

Accepted Answer

A) True 
 B)False

Question 13

A decrease in the inflation rate from 10% to 3% implies that disinflation has occurred.

Accepted Answer

A) True 
 B)False

Question 14

The ratio of nominal economic output to real economic output multiplied by 100 is the:

Accepted Answer

A)  consumer price index. 
B)  GDP deflator. 
C)  producer price index. 
D)  exchange rate. 
A)  consumer price index. 
B)  GDP deflator. 
C)  producer price index. 
D)  exchange rate.

Question 15

If the price level is 134 in 2008 and 149 in 2009,what is the inflation rate over this period?

Accepted Answer

The answer of If the price level is 134 in...

In times of financial panic,we expect the velocity of money to:

When the money supply and the demand for goods increase at the same time:

The bundle of goods used to calculate the consumer price index remains constant over time.

The Fisher effect is the tendency of:

If a lender expects an inflation rate of 5% and asks for a nominal interest rate of 10%,then the lender expects to earn a real interest rate of:

Compared to the early 1980s,inflation since 1985 has been relatively low.

In the long run,money:

Money illusion occurs when people:

Inflation hurts the economy because:

According to the quantity theory of money,a change in the money supply affects:

A decrease in the inflation rate from 10% to 3% implies that deflation has occurred.

Inflation can reduce the real return that lenders receive on their loans,in effect transferring wealth from borrowers to lenders.

A decrease in the inflation rate from 10% to 3% implies that disinflation has occurred.

The ratio of nominal economic output to real economic output multiplied by 100 is the:

If the price level is 134 in 2008 and 149 in 2009,what is the inflation rate over this period?

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 12: Inflation and the Quantity Theory of Money

In times of financial panic,we expect the velocity of money to:

When the money supply and the demand for goods increase at the same time:

The bundle of goods used to calculate the consumer price index remains constant over time.

The Fisher effect is the tendency of:

If a lender expects an inflation rate of 5% and asks for a nominal interest rate of 10%,then the lender expects to earn a real interest rate of:

Compared to the early 1980s,inflation since 1985 has been relatively low.

In the long run,money:

Money illusion occurs when people:

Inflation hurts the economy because:

According to the quantity theory of money,a change in the money supply affects:

A decrease in the inflation rate from 10% to 3% implies that deflation has occurred.

Inflation can reduce the real return that lenders receive on their loans,in effect transferring wealth from borrowers to lenders.

A decrease in the inflation rate from 10% to 3% implies that disinflation has occurred.

The ratio of nominal economic output to real economic output multiplied by 100 is the:

If the price level is 134 in 2008 and 149 in 2009,what is the inflation rate over this period?

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters