Question 1

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

Accepted Answer

A)  excess demand for money which causes the price level to rise. 
B)  excess demand for money which causes the price level to fall. 
C)  excess supply of money which causes the price level to rise. 
D)  excess supply of money which causes the price level to fall. 
A)  excess demand for money which causes the price level to rise. 
B)  excess demand for money which causes the price level to fall. 
C)  excess supply of money which causes the price level to rise. 
D)  excess supply of money which causes the price level to fall.

Question 2

When inflation rises, firms make

Accepted Answer

A)  more frequent price changes. This raises their menu costs. 
B)  more frequent price changes. This reduces their menu costs. 
C)  less frequent price changes. This raises their menu costs. 
D)  less frequent price changes. This reduces their menu costs. 
A)  more frequent price changes. This raises their menu costs. 
B)  more frequent price changes. This reduces their menu costs. 
C)  less frequent price changes. This raises their menu costs. 
D)  less frequent price changes. This reduces their menu costs.

Question 3

In order to maintain stable prices, a central bank must

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 4

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

Accepted Answer

A)  the price level and nominal GDP 
B)  the price level and real GDP 
C)  only real GDP 
D)  only the price level 
A)  the price level and nominal GDP 
B)  the price level and real GDP 
C)  only real GDP 
D)  only the price level

Question 5

The price of a Honda Accord

Accepted Answer

A)  and the price of a Honda Accord divided by the price of a Honda Civic are both real variables. 
B)  and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables. 
C)  is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable. 
D)  is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable. 
A)  and the price of a Honda Accord divided by the price of a Honda Civic are both real variables. 
B)  and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables. 
C)  is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable. 
D)  is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.

Question 6

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. If the relevant money-supply curve is the one labeled MS2, then

Accepted Answer

A)  when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services. 
B)  when the money market is in equilibrium, one unit of goods and services sells for 33 cents. 
C)  there is an excess demand for money if the value of money in terms of goods and services is 0.5. 
D)  All of the above are correct. 
A)  when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services. 
B)  when the money market is in equilibrium, one unit of goods and services sells for 33 cents. 
C)  there is an excess demand for money if the value of money in terms of goods and services is 0.5. 
D)  All of the above are correct.

Question 7

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

Accepted Answer

A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases. 
A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases.

Question 8

The inflation tax

Accepted Answer

A)  is an alternative to income taxes and government borrowing. 
B)  taxes most those who hold the most money. 
C)  is the revenue created when the government prints money. 
D)  All of the above are correct. 
A)  is an alternative to income taxes and government borrowing. 
B)  taxes most those who hold the most money. 
C)  is the revenue created when the government prints money. 
D)  All of the above are correct.

Question 9

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

Accepted Answer

A)  28.00 percent 
B)  36.25 percent 
C)  43.75 percent 
D)  67.50 percent 
A)  28.00 percent 
B)  36.25 percent 
C)  43.75 percent 
D)  67.50 percent

Question 10

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

Accepted Answer

A)  higher than he had expected, and the real value of the loan is higher than he had expected. 
B)  higher than he had expected, and the real value of the loan is lower than he had expected. 
C)  lower than he had expected, and the real value of the loan is higher than he had expected. 
D)  lower then he had expected, and the real value of the loan is lower than he had expected. 
A)  higher than he had expected, and the real value of the loan is higher than he had expected. 
B)  higher than he had expected, and the real value of the loan is lower than he had expected. 
C)  lower than he had expected, and the real value of the loan is higher than he had expected. 
D)  lower then he had expected, and the real value of the loan is lower than he had expected.

Question 11

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 12

If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.

Accepted Answer

A) True 
 B)False

Question 13

When the price level falls, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)  increases, so the value of money rises. 
B)  increases, so the value of money falls. 
C)  decreases, so the value of money rises. 
D)  decreases, so the value of money falls. 
A)  increases, so the value of money rises. 
B)  increases, so the value of money falls. 
C)  decreases, so the value of money rises. 
D)  decreases, so the value of money falls.

Question 14

When the price level rises, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)  increases, and so the value of money rises. 
B)  increases, and so the value of money falls. 
C)  decreases, and so the value of money rises. 
D)  decreases, and so the value of money falls 
A)  increases, and so the value of money rises. 
B)  increases, and so the value of money falls. 
C)  decreases, and so the value of money rises. 
D)  decreases, and so the value of money falls

Question 15

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Accepted Answer

double, re

Question 16

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Accepted Answer

A)  two percent and prices fell one percent. 
B)  two percent and prices rose one percent. 
C)  three percent and prices rose one percent. 
D)  three percent and prices fell one percent. 
A)  two percent and prices fell one percent. 
B)  two percent and prices rose one percent. 
C)  three percent and prices rose one percent. 
D)  three percent and prices fell one percent.

Question 17

Printing money to finance government expenditures

Accepted Answer

A)  causes the value of money to rise. 
B)  imposes a tax on everyone who holds money. 
C)  is the principal method by which the U.S. government finances its expenditures. 
D)  causes prices to fall. 
A)  causes the value of money to rise. 
B)  imposes a tax on everyone who holds money. 
C)  is the principal method by which the U.S. government finances its expenditures. 
D)  causes prices to fall.

Question 18

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Accepted Answer

A)  M = $500, V = 4. 
B)  M = $250, V = 8. 
C)  M = $1,000, V = 2. 
D)  All of the above are correct. 
A)  M = $500, V = 4. 
B)  M = $250, V = 8. 
C)  M = $1,000, V = 2. 
D)  All of the above are correct.

Question 19

Wealth is redistributed from debtors to creditors when inflation is

Accepted Answer

A)  high, whether it is expected or not. 
B)  low, whether it is expected or not. 
C)  unexpectedly high. 
D)  unexpectedly low. 
A)  high, whether it is expected or not. 
B)  low, whether it is expected or not. 
C)  unexpectedly high. 
D)  unexpectedly low.

Question 20

Wealth is redistributed from creditors to debtors when inflation is

Accepted Answer

A)  high, whether it is expected or not. 
B)  low, whether it is expected or not. 
C)  unexpectedly high. 
D)  unexpectedly low. 
A)  high, whether it is expected or not. 
B)  low, whether it is expected or not. 
C)  unexpectedly high. 
D)  unexpectedly low.

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

When inflation rises, firms make

In order to maintain stable prices, a central bank must

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

The price of a Honda Accord

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. If the relevant money-supply curve is the one labeled MS2, then

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

The inflation tax

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.

When the price level falls, the number of dollars needed to buy a representative basket of goods

When the price level rises, the number of dollars needed to buy a representative basket of goods

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Printing money to finance government expenditures

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Wealth is redistributed from debtors to creditors when inflation is

Wealth is redistributed from creditors to debtors when inflation is

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

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

When inflation rises, firms make

In order to maintain stable prices, a central bank must

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

The price of a Honda Accord

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. If the relevant money-supply curve is the one labeled MS2, then

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

The inflation tax

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.

When the price level falls, the number of dollars needed to buy a representative basket of goods

When the price level rises, the number of dollars needed to buy a representative basket of goods

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Printing money to finance government expenditures

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Wealth is redistributed from debtors to creditors when inflation is

Wealth is redistributed from creditors to debtors when inflation is

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

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .