Question 1

The supply of money increases when

Accepted Answer

A)  the price level falls. 
B)  the interest rate increases. 
C)  the Fed makes open-market purchases. 
D)  money demand increases. 
A)  the price level falls. 
B)  the interest rate increases. 
C)  the Fed makes open-market purchases. 
D)  money demand increases.

Question 2

If there is inflation, then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)  high relative price. Relative-price variability rises as the inflation rate rises. 
B)  high relative price. Relative-price variability falls as the inflation rate rises. 
C)  low relative price. Relative-price variability rises as the inflation rate rises. 
D)  low relative price. Relative-price variability falls as the inflation rate rises. 
A)  high relative price. Relative-price variability rises as the inflation rate rises. 
B)  high relative price. Relative-price variability falls as the inflation rate rises. 
C)  low relative price. Relative-price variability rises as the inflation rate rises. 
D)  low relative price. Relative-price variability falls as the inflation rate rises.

Question 3

When deflation exists,

Accepted Answer

A)  the real interest rate is less than the nominal interest rate. 
B)  the real interest rate is greater than the nominal interest rate. 
C)  the real interest rate and inflation are less than the nominal interest rate. 
D)  prices rise. 
A)  the real interest rate is less than the nominal interest rate. 
B)  the real interest rate is greater than the nominal interest rate. 
C)  the real interest rate and inflation are less than the nominal interest rate. 
D)  prices rise.

Question 4

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

Accepted Answer

The answer of If the price level this year was...

Question 5

The classical dichotomy refers to the idea that the supply of money

Accepted Answer

A)  is irrelevant for understanding the determinants of nominal and real variables. 
B)  determines nominal variables, but not real variables. 
C)  determines real variables, but not nominal variables. 
D)  is a determinant of both real and nominal variables. 
A)  is irrelevant for understanding the determinants of nominal and real variables. 
B)  determines nominal variables, but not real variables. 
C)  determines real variables, but not nominal variables. 
D)  is a determinant of both real and nominal variables.

Question 6

In the U.S., taxes are paid on one's _____ gains/returns. Therefore, a _____ inflation rate encourages more saving.

Accepted Answer

The answer of In the U.S., taxes are paid on...

Question 7

If P denotes the price of goods and services measured in terms of money, then

Accepted Answer

A)  1/P represents the value of money measured in terms of goods and services. 
B)  P can be regarded as the "overall price level." 
C)  an increase in the value of money is associated with a decrease in P. 
D)  All of the above are correct. 
A)  1/P represents the value of money measured in terms of goods and services. 
B)  P can be regarded as the "overall price level." 
C)  an increase in the value of money is associated with a decrease in P. 
D)  All of the above are correct.

Question 8

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 2.1percent. Then the inflation rate is 2 percent.

Accepted Answer

A) True 
 B)False

Question 9

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Accepted Answer

Inflation has raised the general price l

Question 10

Why did farmers in the late 1800s dislike deflation?

Accepted Answer

Most had large nominal debts.

Question 11

Market economies rely on which of the following to allocate scarce resources?

Accepted Answer

A)  government 
B)  consumers 
C)  relative prices 
D)  real interest rates 
A)  government 
B)  consumers 
C)  relative prices 
D)  real interest rates

Question 12

When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to

Accepted Answer

A)  spend more so the value of a dollar rises. 
B)  spend more so the value of a dollar falls. 
C)  spend less so the value of a dollar rises. 
D)  spend less so the value of a dollar falls. 
A)  spend more so the value of a dollar rises. 
B)  spend more so the value of a dollar falls. 
C)  spend less so the value of a dollar rises. 
D)  spend less so the value of a dollar falls.

Question 13

According to the principle of monetary neutrality, a decrease in the money supply will not change

Accepted Answer

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

Question 14

Open-market purchases by the Fed

Accepted Answer

A)  make the price level and value of money fall. 
B)  make the price level rise, and make the value of money fall. 
C)  make the price level and make the value of money rise. 
D)  make the price level fall, and make the value of money rise. 
A)  make the price level and value of money fall. 
B)  make the price level rise, and make the value of money fall. 
C)  make the price level and make the value of money rise. 
D)  make the price level fall, and make the value of money rise.

Question 15

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

In the U.S., taxes on capital gains are computed using

Accepted Answer

A)  nominal gains. This is one way by which higher inflation discourages saving. 
B)  nominal gains. This is one way by which higher inflation encourages saving. 
C)  real gains. This is one way by which higher inflation discourages saving. 
D)  real gains. This is one way by which higher inflation encourages saving. 
A)  nominal gains. This is one way by which higher inflation discourages saving. 
B)  nominal gains. This is one way by which higher inflation encourages saving. 
C)  real gains. This is one way by which higher inflation discourages saving. 
D)  real gains. This is one way by which higher inflation encourages saving.

Question 18

With the value of money on the vertical axis, the money supply curve is

Accepted Answer

A)  upward sloping because people supply a larger quantity of money when the value of money increases. 
B)  downward sloping because people supply a larger quantity of money when the value of money decreases. 
C)  horizontal because we assume the central bank controls the money supply 
D)  vertical because we assume the central bank controls the money supply. 
A)  upward sloping because people supply a larger quantity of money when the value of money increases. 
B)  downward sloping because people supply a larger quantity of money when the value of money decreases. 
C)  horizontal because we assume the central bank controls the money supply 
D)  vertical because we assume the central bank controls the money supply.

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

The value of money falls as the price level

Accepted Answer

A)  rises, because the number of dollars needed to buy a representative basket of goods rises. 
B)  rises, because the number of dollars needed to buy a representative basket of goods falls. 
C)  falls, because the number of dollars needed to buy a representative basket of goods rises. 
D)  falls, because the number of dollars needed to buy a representative basket of goods falls. 
A)  rises, because the number of dollars needed to buy a representative basket of goods rises. 
B)  rises, because the number of dollars needed to buy a representative basket of goods falls. 
C)  falls, because the number of dollars needed to buy a representative basket of goods rises. 
D)  falls, because the number of dollars needed to buy a representative basket of goods falls.

The supply of money increases when

If there is inflation, then a firm that has kept its price fixed for some time will have a

When deflation exists,

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

The classical dichotomy refers to the idea that the supply of money

In the U.S., taxes are paid on one's _ gains/returns. Therefore, a _ inflation rate encourages more saving.

If P denotes the price of goods and services measured in terms of money, then

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 2.1percent. Then the inflation rate is 2 percent.

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Why did farmers in the late 1800s dislike deflation?

Market economies rely on which of the following to allocate scarce resources?

When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to

According to the principle of monetary neutrality, a decrease in the money supply will not change

Open-market purchases by the Fed

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

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

In the U.S., taxes on capital gains are computed using

With the value of money on the vertical axis, the money supply curve is

The source of all four classic hyperinflations was high rates of money growth.

The value of money falls as the price level

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 supply of money increases when

If there is inflation, then a firm that has kept its price fixed for some time will have a

When deflation exists,

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

The classical dichotomy refers to the idea that the supply of money

In the U.S., taxes are paid on one's _____ gains/returns. Therefore, a _____ inflation rate encourages more saving.

If P denotes the price of goods and services measured in terms of money, then

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 2.1percent. Then the inflation rate is 2 percent.

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Why did farmers in the late 1800s dislike deflation?

Market economies rely on which of the following to allocate scarce resources?

When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to

According to the principle of monetary neutrality, a decrease in the money supply will not change

Open-market purchases by the Fed

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

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

In the U.S., taxes on capital gains are computed using

With the value of money on the vertical axis, the money supply curve is

The source of all four classic hyperinflations was high rates of money growth.

The value of money falls as the price level

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

In the U.S., taxes are paid on one's _ gains/returns. Therefore, a _ inflation rate encourages more saving.