Question 1

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Accepted Answer

A) True 
 B)False

Question 2

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Accepted Answer

A) True 
 B)False

Question 3

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Accepted Answer

The after- tax nominal interes

Question 4

If the nominal interest rate is 8 percent and expected inflation is 2.5 percent, then what is the real interest rate?

Accepted Answer

A)  10.5 percent 
B)  20 percent 
C)  5.5 percent 
D)  3.2 percent 
A)  10.5 percent 
B)  20 percent 
C)  5.5 percent 
D)  3.2 percent

Question 5

The supply of money is determined by

Accepted Answer

A)  the price level. 
B)  the Treasury and Congressional Budget Office. 
C)  the Federal Reserve System. 
D)  the demand for money. 
A)  the price level. 
B)  the Treasury and Congressional Budget Office. 
C)  the Federal Reserve System. 
D)  the demand for money.

Question 6

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Accepted Answer

A)  the price level will rise. 
B)  the value of money will rise. 
C)  money demand will shift leftward. 
D)  money demand will shift rightward. 
A)  the price level will rise. 
B)  the value of money will rise. 
C)  money demand will shift leftward. 
D)  money demand will shift rightward.

Question 7

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

Accepted Answer

A)  both the nominal and the real interest rate fall. 
B)  neither the nominal nor the real interest rate fall. 
C)  the nominal interest rate falls, but the real interest rate does not. 
D)  the real interest rate falls, but the nominal interest rate does not. 
A)  both the nominal and the real interest rate fall. 
B)  neither the nominal nor the real interest rate fall. 
C)  the nominal interest rate falls, but the real interest rate does not. 
D)  the real interest rate falls, but the nominal interest rate does not.

Question 8

If a bank posts a nominal interest rate of 4 percent, and inflation is expected to be 3 percent, then

Accepted Answer

A)  the expected real interest rate is 7 percent. 
B)  the expected real interest rate is 1 percent. 
C)  the expected real interest rate is 1.33 percent. 
D)  the expected real interest rate is 12 percent. 
A)  the expected real interest rate is 7 percent. 
B)  the expected real interest rate is 1 percent. 
C)  the expected real interest rate is 1.33 percent. 
D)  the expected real interest rate is 12 percent.

Question 9

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.  
-Refer to Figure 30-3. At the end of 2009 the relevant money-supply curve was the one labeled MS1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)  -33 percent 
B)  17 percent 
C)  50 percent 
D)  67 percent 
A)  -33 percent 
B)  17 percent 
C)  50 percent 
D)  67 percent

Question 10

If M = 2,000, P = 2.25, and Y= 6,000, what is velocity?

Accepted Answer

A)  6.75. 
B)  3.00. 
C)  1.33. 
D)  1.50. 
A)  6.75. 
B)  3.00. 
C)  1.33. 
D)  1.50.

Question 11

The quantity theory of money can explain hyperinflations but not moderate inflation.

Accepted Answer

A) True 
 B)False

Question 12

When prices are falling, economists say that there is

Accepted Answer

A)  disinflation. 
B)  deflation. 
C)  a contraction. 
D)  an inverted inflation. 
A)  disinflation. 
B)  deflation. 
C)  a contraction. 
D)  an inverted inflation.

Question 13

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Accepted Answer

A)  Y or V rise 
B)  Y or V fall 
C)  Y rises or V falls 
D)  Y falls or V rises 
A)  Y or V rise 
B)  Y or V fall 
C)  Y rises or V falls 
D)  Y falls or V rises

Question 14

Suppose there is a surplus in the money market.

Accepted Answer

A)  This could have been created by an increase in the money supply. The value of money will rise. 
B)  This could have been created by an increase in the money supply. The value of money will fall. 
C)  This could have been created by a decrease in the money supply. The value of money will rise. 
D)  This could have been created by a decrease in the money supply. The value of money will fall. 
A)  This could have been created by an increase in the money supply. The value of money will rise. 
B)  This could have been created by an increase in the money supply. The value of money will fall. 
C)  This could have been created by a decrease in the money supply. The value of money will rise. 
D)  This could have been created by a decrease in the money supply. The value of money will fall.

Question 15

Between 1880 and 1896 the average level of prices in the U.S. economy

Accepted Answer

A)  fell 23 percent. 
B)  fell 4 percent. 
C)  rose 23 percent. 
D)  rose 50 percent. 
A)  fell 23 percent. 
B)  fell 4 percent. 
C)  rose 23 percent. 
D)  rose 50 percent.

Question 16

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Accepted Answer

A) True 
 B)False

Question 17

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not.

Accepted Answer

A) True 
 B)False

Question 18

The Fisher effect

Accepted Answer

A)  says the government can generate revenue by printing money. 
B)  says there is a one for one adjustment of the nominal interest rate to the inflation rate. 
C)  explains how higher money supply growth leads to higher inflation. 
D)  explains how prices adjust to obtain equilibrium in the money market. 
A)  says the government can generate revenue by printing money. 
B)  says there is a one for one adjustment of the nominal interest rate to the inflation rate. 
C)  explains how higher money supply growth leads to higher inflation. 
D)  explains how prices adjust to obtain equilibrium in the money market.

Question 19

The value of money falls. This might be because the Federal Reserve

Accepted Answer

A)  bought bonds, which increased the money supply. 
B)  bought bonds, which decreased the money supply. 
C)  sold bonds, which increased the money supply. 
D)  sold bonds, which decreased the money supply. 
A)  bought bonds, which increased the money supply. 
B)  bought bonds, which decreased the money supply. 
C)  sold bonds, which increased the money supply. 
D)  sold bonds, which decreased the money supply.

Question 20

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

Accepted Answer

A)  lenders and people holding a lot of currency 
B)  lenders but not people holding a lot of currency 
C)  people holding a lot of currency but not lenders 
D)  neither lenders nor people holding a lot of currency 
A)  lenders and people holding a lot of currency 
B)  lenders but not people holding a lot of currency 
C)  people holding a lot of currency but not lenders 
D)  neither lenders nor people holding a lot of currency

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

If the nominal interest rate is 8 percent and expected inflation is 2.5 percent, then what is the real interest rate?

The supply of money is determined by

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

If a bank posts a nominal interest rate of 4 percent, and inflation is expected to be 3 percent, then

If M = 2,000, P = 2.25, and Y= 6,000, what is velocity?

The quantity theory of money can explain hyperinflations but not moderate inflation.

When prices are falling, economists say that there is

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Suppose there is a surplus in the money market.

Between 1880 and 1896 the average level of prices in the U.S. economy

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not.

The Fisher effect

The value of money falls. This might be because the Federal Reserve

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

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

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Exam 12: Money Growth and Inflation

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

If the nominal interest rate is 8 percent and expected inflation is 2.5 percent, then what is the real interest rate?

The supply of money is determined by

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

If a bank posts a nominal interest rate of 4 percent, and inflation is expected to be 3 percent, then

If M = 2,000, P = 2.25, and Y= 6,000, what is velocity?

The quantity theory of money can explain hyperinflations but not moderate inflation.

When prices are falling, economists say that there is

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Suppose there is a surplus in the money market.

Between 1880 and 1896 the average level of prices in the U.S. economy

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not.

The Fisher effect

The value of money falls. This might be because the Federal Reserve

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

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