Question 1

When the money market is drawn with the value of money on the vertical axis, the price level increases if

Accepted Answer

A)  money demand shifts right and decreases if money supply shifts right. 
B)  money demand shifts right and decreases if money supply shifts left. 
C)  money demand shifts left and decreases if money supply shifts right. 
D)  money demand shifts left and decreases if money supply shifts left. 
A)  money demand shifts right and decreases if money supply shifts right. 
B)  money demand shifts right and decreases if money supply shifts left. 
C)  money demand shifts left and decreases if money supply shifts right. 
D)  money demand shifts left and decreases if money supply shifts left.

Question 2

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Accepted Answer

A)  5.25 percent 
B)  5 percent 
C)  2.3 percent 
D)  2 percent 
A)  5.25 percent 
B)  5 percent 
C)  2.3 percent 
D)  2 percent

Question 3

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Accepted Answer

A)  Y rose, V rose 
B)  Y fell, V fell 
C)  Y rose, V fell 
D)  Y fell, V rose 
A)  Y rose, V rose 
B)  Y fell, V fell 
C)  Y rose, V fell 
D)  Y fell, V rose

Question 4

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)  either a rise in output or a rise in the rate at which money changes hands. 
B)  either a rise in output or a fall in the rate at which money changes hands. 
C)  either a fall in output or a rise in the rate at which money changes hands. 
D)  either a fall in output or a fall in the rate at which money changes hands. 
A)  either a rise in output or a rise in the rate at which money changes hands. 
B)  either a rise in output or a fall in the rate at which money changes hands. 
C)  either a fall in output or a rise in the rate at which money changes hands. 
D)  either a fall in output or a fall in the rate at which money changes hands.

Question 5

The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate?

Accepted Answer

A)  7 percent 
B)  2.5 percent 
C)  10 percent 
D)  3 percent 
A)  7 percent 
B)  2.5 percent 
C)  10 percent 
D)  3 percent

Question 6

Figure 30-1  
-Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then

Accepted Answer

A)  the quantity of money demanded is greater than the quantity supplied; the price level will rise. 
B)  the quantity of money demanded is greater than the quantity supplied; the price level will fall. 
C)  the quantity of money supplied is greater than the quantity demanded; the price level will rise. 
D)  the quantity of money supplied is greater than the quantity demanded; the price level will fall. 
A)  the quantity of money demanded is greater than the quantity supplied; the price level will rise. 
B)  the quantity of money demanded is greater than the quantity supplied; the price level will fall. 
C)  the quantity of money supplied is greater than the quantity demanded; the price level will rise. 
D)  the quantity of money supplied is greater than the quantity demanded; the price level will fall.

Question 7

Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an

Accepted Answer

A)  excess demand for money that will result in an increase in spending. 
B)  excess demand for money that will result in a decrease in spending. 
C)  excess supply of money that will result in an increase in spending. 
D)  excess supply of money that will result in a decrease in spending. 
A)  excess demand for money that will result in an increase in spending. 
B)  excess demand for money that will result in a decrease in spending. 
C)  excess supply of money that will result in an increase in spending. 
D)  excess supply of money that will result in a decrease in spending.

Question 8

Money demand refers to

Accepted Answer

A)  the total quantity of financial assets that people want to hold. 
B)  how much income people want to earn per year. 
C)  how much wealth people want to hold in liquid form. 
D)  how much currency the Federal Reserve decides to print. 
A)  the total quantity of financial assets that people want to hold. 
B)  how much income people want to earn per year. 
C)  how much wealth people want to hold in liquid form. 
D)  how much currency the Federal Reserve decides to print.

Question 9

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Accepted Answer

When the money supply increases, there i

Question 10

Figure 30-1  
-Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Accepted Answer

A)  demand for money that is represented by the distance between points A and C. 
B)  demand for money that is represented by the distance between points A and B. 
C)  supply of money that is represented by the distance between points A and C. 
D)  supply of money that is represented by the distance between points A and B. 
A)  demand for money that is represented by the distance between points A and C. 
B)  demand for money that is represented by the distance between points A and B. 
C)  supply of money that is represented by the distance between points A and C. 
D)  supply of money that is represented by the distance between points A and B.

Question 11

Other things the same, a decrease in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls. 
A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls.

Question 12

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. What quantity is measured along the vertical axis?

Accepted Answer

A)  the price level 
B)  the velocity of money 
C)  the value of money 
D)  the quantity of money 
A)  the price level 
B)  the velocity of money 
C)  the value of money 
D)  the quantity of money

Question 13

The source of hyperinflations is primarily

Accepted Answer

A)  lower output growth. 
B)  continuing declines in velocity. 
C)  increases in money-supply growth. 
D)  continuing increases in money demand. 
A)  lower output growth. 
B)  continuing declines in velocity. 
C)  increases in money-supply growth. 
D)  continuing increases in money demand.

Question 14

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Accepted Answer

A)  movement to the right along the money demand curve. 
B)  movement to the left along the money demand curve. 
C)  shift to the right of the money supply curve. 
D)  shift to the left of the money supply curve. 
A)  movement to the right along the money demand curve. 
B)  movement to the left along the money demand curve. 
C)  shift to the right of the money supply curve. 
D)  shift to the left of the money supply curve.

Question 15

Monetary neutrality means that a change in the money supply

Accepted Answer

A)  does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run. 
B)  does not change real GDP. Most economists think this is a good description of the economy in the long run but not the short run. 
C)  does change real GDP. Most economists think this is a good description of the economy in the short-run and the long run. 
D)  does change real GDP. Most economists think this is a good description of the economy in the long run but not the short run. 
A)  does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run. 
B)  does not change real GDP. Most economists think this is a good description of the economy in the long run but not the short run. 
C)  does change real GDP. Most economists think this is a good description of the economy in the short-run and the long run. 
D)  does change real GDP. Most economists think this is a good description of the economy in the long run but not the short run.

Question 16

Deflation

Accepted Answer

A)  increases incomes and enhances the ability of debtors to pay off their debts. 
B)  increases incomes and reduces the ability of debtors to pay off their debts. 
C)  decreases incomes and enhances the ability of debtors to pay off their debts. 
D)  decreases incomes and reduces the ability of debtors to pay off their debts. 
A)  increases incomes and enhances the ability of debtors to pay off their debts. 
B)  increases incomes and reduces the ability of debtors to pay off their debts. 
C)  decreases incomes and enhances the ability of debtors to pay off their debts. 
D)  decreases incomes and reduces the ability of debtors to pay off their debts.

Question 17

Economic variables whose values are measured in monetary units are called

Accepted Answer

A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables. 
A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables.

Question 18

The supply of money increases when

Accepted Answer

A)  the value of money increases. 
B)  the interest rate increases. 
C)  the Federal Reserve purchases bonds. 
D)  velocity increases. 
A)  the value of money increases. 
B)  the interest rate increases. 
C)  the Federal Reserve purchases bonds. 
D)  velocity increases.

Question 19

The costs a business incurs to change its prices are called .

Accepted Answer

The answer of The costs a business incurs to change...

Question 20

According to the classical dichotomy, which of the following increases when the money supply increases?

Accepted Answer

A)  the real interest rate 
B)  real GDP 
C)  the real wage 
D)  the nominal wage. 
A)  the real interest rate 
B)  real GDP 
C)  the real wage 
D)  the nominal wage.

When the money market is drawn with the value of money on the vertical axis, the price level increases if

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate?

Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then

Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an

Money demand refers to

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Other things the same, a decrease in velocity means that

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. What quantity is measured along the vertical axis?

The source of hyperinflations is primarily

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Monetary neutrality means that a change in the money supply

Deflation

Economic variables whose values are measured in monetary units are called

The supply of money increases when

The costs a business incurs to change its prices are called .

According to the classical dichotomy, which of the following increases when the money supply increases?

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

When the money market is drawn with the value of money on the vertical axis, the price level increases if

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate?

Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then

Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an

Money demand refers to

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Other things the same, a decrease in velocity means that

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. What quantity is measured along the vertical axis?

The source of hyperinflations is primarily

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Monetary neutrality means that a change in the money supply

Deflation

Economic variables whose values are measured in monetary units are called

The supply of money increases when

The costs a business incurs to change its prices are called .

According to the classical dichotomy, which of the following increases when the money supply increases?

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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