Question 1

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Accepted Answer

A)  8 percent 
B)  15 percent 
C)  2 percent 
D)  1.7 percent 
A)  8 percent 
B)  15 percent 
C)  2 percent 
D)  1.7 percent

Question 2

Which of the following is correct?

Accepted Answer

A)  Inflation impedes financial markets in their role of allocating savings to alternative investments. 
B)  Inflation encourages savings through the tax treatment on capital gains. 
C)  Inflation encourages larger holdings of currency by the public. 
D)  Inflation reduces people's real purchasing power. 
A)  Inflation impedes financial markets in their role of allocating savings to alternative investments. 
B)  Inflation encourages savings through the tax treatment on capital gains. 
C)  Inflation encourages larger holdings of currency by the public. 
D)  Inflation reduces people's real purchasing power.

Question 3

High and unexpected inflation has a greater cost

Accepted Answer

A)  for those who borrow than for those who save. 
B)  for those who hold a little money than for those who hold a lot of money. 
C)  for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation. 
D)  All of the above are correct. 
A)  for those who borrow than for those who save. 
B)  for those who hold a little money than for those who hold a lot of money. 
C)  for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation. 
D)  All of the above are correct.

Question 4

Relative-price variability

Accepted Answer

A)  rises with inflation, leading to an improved allocation of resources. 
B)  rises with inflation, leading to a misallocation of resources. 
C)  falls with inflation, leading to an improved allocation of resources. 
D)  falls with inflation, leading to a misallocation of resources. 
A)  rises with inflation, leading to an improved allocation of resources. 
B)  rises with inflation, leading to a misallocation of resources. 
C)  falls with inflation, leading to an improved allocation of resources. 
D)  falls with inflation, leading to a misallocation of resources.

Question 5

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

Accepted Answer

A)  menu costs and shoeleather costs 
B)  menu costs but not shoeleather costs 
C)  shoeleather costs but not menu costs 
D)  menu costs but not shoeleather costs. 
A)  menu costs and shoeleather costs 
B)  menu costs but not shoeleather costs 
C)  shoeleather costs but not menu costs 
D)  menu costs but not shoeleather costs.

Question 6

If velocity and output were nearly constant, then

Accepted Answer

A)  the inflation rate would be much higher than the money supply growth rate. 
B)  the inflation rate would be about the same as the money supply growth rate. 
C)  the inflation rate would be much lower than the money supply growth rate. 
D)  any of the above would be possible. 
A)  the inflation rate would be much higher than the money supply growth rate. 
B)  the inflation rate would be about the same as the money supply growth rate. 
C)  the inflation rate would be much lower than the money supply growth rate. 
D)  any of the above would be possible.

Question 7

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

Accepted Answer

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

Question 8

Walter puts money in a savings account at his bank earning 3.5 percent. One year later he takes his money out and notes that while his money was earning interest, prices rose 1.5 percent. Walter earned a nominal interest rate of

Accepted Answer

A)  3.5 percent and a real interest rate of 5 percent. 
B)  3.5 percent and a real interest rate of 2 percent. 
C)  5 percent and a real interest rate of 3.5 percent 
D)  5 percent and a real interest rate of 2 percent 
A)  3.5 percent and a real interest rate of 5 percent. 
B)  3.5 percent and a real interest rate of 2 percent. 
C)  5 percent and a real interest rate of 3.5 percent 
D)  5 percent and a real interest rate of 2 percent

Question 9

Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?

Accepted Answer

nominal interest rat

Question 10

Shoeleather costs arise when higher inflation rates induce people to

Accepted Answer

A)  spend more time looking for bargains. 
B)  spend less time looking for bargains. 
C)  hold more money. 
D)  hold less money. 
A)  spend more time looking for bargains. 
B)  spend less time looking for bargains. 
C)  hold more money. 
D)  hold less money.

Question 11

If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Accepted Answer

A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value. 
A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value.

Question 13

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  4.5. 
A)  1. 
B)  1.5. 
C)  2. 
D)  4.5.

Question 14

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

Accepted Answer

A)  the money supply and the price level increase. 
B)  the money supply and the price level decrease. 
C)  the money supply increases and the price level decreases. 
D)  the money supply increases and the price level increases. 
A)  the money supply and the price level increase. 
B)  the money supply and the price level decrease. 
C)  the money supply increases and the price level decreases. 
D)  the money supply increases and the price level increases.

Question 15

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 16

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

A)  real GDP. 
B)  real wages. 
C)  real interest rates. 
D)  All of the above are correct. 
A)  real GDP. 
B)  real wages. 
C)  real interest rates. 
D)  All of the above are correct.

Question 17

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Accepted Answer

A)  $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
B)  $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
C)  15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
D)  15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
A)  $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
B)  $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
C)  15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars. 
D)  15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

Question 18

The price level rises if either

Accepted Answer

A)  money demand or money supply shifts rightward. 
B)  money demand shifts rightward or money supply shifts leftward. 
C)  money demand shifts leftward or money supply shifts rightward. 
D)  money demand or money supply shifts leftward. 
A)  money demand or money supply shifts rightward. 
B)  money demand shifts rightward or money supply shifts leftward. 
C)  money demand shifts leftward or money supply shifts rightward. 
D)  money demand or money supply shifts leftward.

Question 19

The Fisher effect says that

Accepted Answer

A)  the nominal interest rate adjusts one for one with the inflation rate. 
B)  the growth rate of the money supply is negatively related to the velocity of money. 
C)  real variables are heavily influenced by the monetary system. 
D)  All of the above are correct. 
A)  the nominal interest rate adjusts one for one with the inflation rate. 
B)  the growth rate of the money supply is negatively related to the velocity of money. 
C)  real variables are heavily influenced by the monetary system. 
D)  All of the above are correct.

Question 20

Which of the following is an example of menu costs?

Accepted Answer

A)  deciding on new prices 
B)  printing new price lists 
C)  advertising new prices 
D)  All of the above are examples of menu costs. 
A)  deciding on new prices 
B)  printing new price lists 
C)  advertising new prices 
D)  All of the above are examples of menu costs.

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Which of the following is correct?

High and unexpected inflation has a greater cost

Relative-price variability

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

If velocity and output were nearly constant, then

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

Walter puts money in a savings account at his bank earning 3.5 percent. One year later he takes his money out and notes that while his money was earning interest, prices rose 1.5 percent. Walter earned a nominal interest rate of

Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?

Shoeleather costs arise when higher inflation rates induce people to

If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

The price level rises if either

The Fisher effect says that

Which of the following is an example of menu costs?

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

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the 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

Six Debates Over Macroeconomic Policy

Filters

Exam 12: Money Growth and Inflation

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Which of the following is correct?

High and unexpected inflation has a greater cost

Relative-price variability

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

If velocity and output were nearly constant, then

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

Walter puts money in a savings account at his bank earning 3.5 percent. One year later he takes his money out and notes that while his money was earning interest, prices rose 1.5 percent. Walter earned a nominal interest rate of

Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?

Shoeleather costs arise when higher inflation rates induce people to

If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

The price level rises if either

The Fisher effect says that

Which of the following is an example of menu costs?

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

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the 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

Six Debates Over Macroeconomic Policy

Filters

An increase in the price level means that a dollar buys goods and services so the value of a dollar .