Question 1

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Accepted Answer

A)  velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P. 
B)  velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P. 
C)  velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P. 
D)  velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P. 
A)  velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P. 
B)  velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P. 
C)  velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P. 
D)  velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P.

Question 2

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Accepted Answer

A) True 
 B)False

Question 3

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Accepted Answer

A)  supply of money, causing people to spend more. 
B)  supply of money, causing people to spend less. 
C)  demand for money, causing people to spend more. 
D)  demand for money, causing people to spend less. 
A)  supply of money, causing people to spend more. 
B)  supply of money, causing people to spend less. 
C)  demand for money, causing people to spend more. 
D)  demand for money, causing people to spend less.

Question 4

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before­tax real capital gain?

Accepted Answer

A)  $1,300 - $1,0001.05) and this is the gain he is to report on his income tax 
B)  $1,300 - $1,0001.05) but he is to report a $300 gain on his income tax 
C)  $1,300 - $1,0001.07) and this is the gain he is to report on his income tax 
D)  $1,300 - $1,0001.07) but he is to report a $300 gain on his income tax 
A)  $1,300 - $1,0001.05) and this is the gain he is to report on his income tax 
B)  $1,300 - $1,0001.05) but he is to report a $300 gain on his income tax 
C)  $1,300 - $1,0001.07) and this is the gain he is to report on his income tax 
D)  $1,300 - $1,0001.07) but he is to report a $300 gain on his income tax

Question 5

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Accepted Answer

A)  The number of dollars you receive increases and the purchasing power of the dollars you receive increases. 
B)  The number of dollars you receive increases and the purchasing power of the dollars you receive decreases. 
C)  The number of dollars you receive decreases and the purchasing power of the dollars you receive increases. 
D)  The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases. 
A)  The number of dollars you receive increases and the purchasing power of the dollars you receive increases. 
B)  The number of dollars you receive increases and the purchasing power of the dollars you receive decreases. 
C)  The number of dollars you receive decreases and the purchasing power of the dollars you receive increases. 
D)  The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.

Question 6

In which case below does a person's purchasing power from saving increase the most?

Accepted Answer

A)  the nominal interest rate = 10% and inflation = 8% 
B)  the nominal interest rate = 9% and inflation = 6% 
C)  the nominal interest rate = 8% and inflation = 4% 
D)  the nominal interest rate = 7% and inflation = 2% 
A)  the nominal interest rate = 10% and inflation = 8% 
B)  the nominal interest rate = 9% and inflation = 6% 
C)  the nominal interest rate = 8% and inflation = 4% 
D)  the nominal interest rate = 7% and inflation = 2%

Question 7

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

Accepted Answer

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

Question 8

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Accepted Answer

A)  the price level and velocity. 
B)  the price level but not velocity. 
C)  velocity but not the price level. 
D)  neither the price level nor velocity. 
A)  the price level and velocity. 
B)  the price level but not velocity. 
C)  velocity but not the price level. 
D)  neither the price level nor velocity.

Question 9

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Accepted Answer

A)  both interest income and capital gains. 
B)  interest income but not capital gains. 
C)  capital gains but not interest income. 
D)  neither interest income nor capital gains. 
A)  both interest income and capital gains. 
B)  interest income but not capital gains. 
C)  capital gains but not interest income. 
D)  neither interest income nor capital gains.

Question 10

If the price level increased from 200 to 250, then what was the inflation rate?

Accepted Answer

A)  50 percent 
B)  25 percent 
C)  20 percent 
D)  None of the above is correct. 
A)  50 percent 
B)  25 percent 
C)  20 percent 
D)  None of the above is correct.

Question 11

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Accepted Answer

A)  the price level must have risen 
B)  the price level must have fallen. 
C)  the price level rises if money supply shifts farther than money demand. 
D)  the price level falls if money supply shifts farther than money demand. 
A)  the price level must have risen 
B)  the price level must have fallen. 
C)  the price level rises if money supply shifts farther than money demand. 
D)  the price level falls if money supply shifts farther than money demand.

Question 12

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

Accepted Answer

A) True 
 B)False

Question 13

If M = 12,000, P = 3, and Y = 32,000, then velocity =

Accepted Answer

A)  1.125. Velocity will rise if money changes hands more frequently. 
B)  1.125. Velocity will rise if money changes hands less frequently. 
C)  8. Velocity will rise if money changes hands more frequently. 
D)  8. Velocity will rise if money changes hands less frequently. 
A)  1.125. Velocity will rise if money changes hands more frequently. 
B)  1.125. Velocity will rise if money changes hands less frequently. 
C)  8. Velocity will rise if money changes hands more frequently. 
D)  8. Velocity will rise if money changes hands less frequently.

Question 14

Economists agree that

Accepted Answer

A)  neither high inflation nor moderate inflation is very costly. 
B)  both high and moderate inflation are quite costly. 
C)  high inflation is costly, but they disagree about the costs of moderate inflation. 
D)  moderate inflation is as costly as high inflation. 
A)  neither high inflation nor moderate inflation is very costly. 
B)  both high and moderate inflation are quite costly. 
C)  high inflation is costly, but they disagree about the costs of moderate inflation. 
D)  moderate inflation is as costly as high inflation.

Question 15

Economic variables whose values are measured in goods 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 16

Velocity is

Accepted Answer

A)  Y/M x P) and increases if dollars are exchanged less frequently. 
B)  Y/M x P) and increases if dollars are exchanged more frequently. 
C)  P x Y)/M and increases if dollars are exchanged less frequently. 
D)  P x Y)/M and increases if dollars are exchanged more frequently. 
A)  Y/M x P) and increases if dollars are exchanged less frequently. 
B)  Y/M x P) and increases if dollars are exchanged more frequently. 
C)  P x Y)/M and increases if dollars are exchanged less frequently. 
D)  P x Y)/M and increases if dollars are exchanged more frequently.

Question 17

In the long run, money demand and money supply determine

Accepted Answer

A)  the price level and the real interest rate. 
B)  the price level but not the real interest rate. 
C)  the real interest rate but not the price level. 
D)  neither the price level nor the real interest rate. 
A)  the price level and the real interest rate. 
B)  the price level but not the real interest rate. 
C)  the real interest rate but not the price level. 
D)  neither the price level nor the real interest rate.

Question 18

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Accepted Answer

The inflation tax refers to the fact tha

Question 19

The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run.

Accepted Answer

A) True 
 B)False

Question 20

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Accepted Answer

A)  The $80 is a real variable. The quantity of shoes is a nominal variable. 
B)  The $80 is a nominal variable. The quantity of shoes is a real variable. 
C)  Both the $80 and the quantity of shoes are nominal variables. 
D)  Both the $80 and the quantity of shoes are real variables. 
A)  The $80 is a real variable. The quantity of shoes is a nominal variable. 
B)  The $80 is a nominal variable. The quantity of shoes is a real variable. 
C)  Both the $80 and the quantity of shoes are nominal variables. 
D)  Both the $80 and the quantity of shoes are real variables.

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's beforetax real capital gain?

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

In which case below does a person's purchasing power from saving increase the most?

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

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

If the price level increased from 200 to 250, then what was the inflation rate?

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

If M = 12,000, P = 3, and Y = 32,000, then velocity =

Economists agree that

Economic variables whose values are measured in goods are called

Velocity is

In the long run, money demand and money supply determine

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run.

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

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

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before­tax real capital gain?

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

In which case below does a person's purchasing power from saving increase the most?

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

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

If the price level increased from 200 to 250, then what was the inflation rate?

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

If M = 12,000, P = 3, and Y = 32,000, then velocity =

Economists agree that

Economic variables whose values are measured in goods are called

Velocity is

In the long run, money demand and money supply determine

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run.

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

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

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's beforetax real capital gain?