Question 1

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

Accepted Answer

A)  demanded increases. 
B)  demanded decreases. 
C)  supplied increases. 
D)  supplied decreases. 
A)  demanded increases. 
B)  demanded decreases. 
C)  supplied increases. 
D)  supplied decreases.

Question 2

Between 1880 and 1886, prices that were

Accepted Answer

A)  lower than expected transferred wealth from creditors to debtors. 
B)  lower than expected transferred wealth from debtors to creditors. 
C)  higher than expected transferred wealth from creditors to debtors. 
D)  higher than expected transferred wealth from debtors to creditors. 
A)  lower than expected transferred wealth from creditors to debtors. 
B)  lower than expected transferred wealth from debtors to creditors. 
C)  higher than expected transferred wealth from creditors to debtors. 
D)  higher than expected transferred wealth from debtors to creditors.

Question 3

An increase in the price level causes the value of money to _____. Therefore, people will want to hold ____ money, because the cost of their purchases has increased.

Accepted Answer

The answer of An increase in the price level causes...

Question 4

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

Accepted Answer

A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical.

Question 5

Steve purchases some land for $30,000. He maintains it, but makes no improvements to it. One year later he sells it for $32,000. Stephanie puts $30,000 in a savings account that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the 35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain and who had the higher after-tax real gain?

Accepted Answer

A)  Steve had both the higher before-tax real gain and the higher after-tax real gain. 
B)  Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain. 
C)  Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain. 
D)  Stephanie had both the higher before-tax real gain and the higher after-tax real gain. 
A)  Steve had both the higher before-tax real gain and the higher after-tax real gain. 
B)  Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain. 
C)  Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain. 
D)  Stephanie had both the higher before-tax real gain and the higher after-tax real gain.

Question 6

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Accepted Answer

A)  decrease that benefited creditors at the expense of debtors. 
B)  decrease that benefited debtors at the expense of creditors. 
C)  increase that benefited creditors at the expense of debtors. 
D)  increase that benefited debtors at the expense of creditors. 
A)  decrease that benefited creditors at the expense of debtors. 
B)  decrease that benefited debtors at the expense of creditors. 
C)  increase that benefited creditors at the expense of debtors. 
D)  increase that benefited debtors at the expense of creditors.

Question 7

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 8

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Accepted Answer

A)  8. 
B)  0.5. 
C)  2. 
D)  3. 
A)  8. 
B)  0.5. 
C)  2. 
D)  3.

Question 9

The price level rises if either

Accepted Answer

A)  money demand or money supply shifts rightward. 
B)  money demand shifts rightward or money supply shifts leftward. 
C)  money demand shifts leftward or money supply shifts rightward. 
D)  money demand or money supply shifts leftward. 
A)  money demand or money supply shifts rightward. 
B)  money demand shifts rightward or money supply shifts leftward. 
C)  money demand shifts leftward or money supply shifts rightward. 
D)  money demand or money supply shifts leftward.

Question 10

Inflation can be measured by the

Accepted Answer

A)  change in the consumer price index. 
B)  percentage change in the consumer price index. 
C)  percentage change in the price of a specific commodity. 
D)  change in the price of a specific commodity. 
A)  change in the consumer price index. 
B)  percentage change in the consumer price index. 
C)  percentage change in the price of a specific commodity. 
D)  change in the price of a specific commodity.

Question 11

When there is inflation, 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 12

Velocity is computed as the

Accepted Answer

A)  price level times real GDP divided by the money supply. 
B)  price level times the money supply divided by real GDP. 
C)  real GDP times the money supply divided by the price level. 
D)  real GDP times the money supply divided by the rate at which money changes hands. 
A)  price level times real GDP divided by the money supply. 
B)  price level times the money supply divided by real GDP. 
C)  real GDP times the money supply divided by the price level. 
D)  real GDP times the money supply divided by the rate at which money changes hands.

Question 13

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. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately

Accepted Answer

A)  3.0 
B)  6.0 
C)  9.0 
D)  1.5 
A)  3.0 
B)  6.0 
C)  9.0 
D)  1.5

Question 14

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 15

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 16

Which of the following is correct?

Accepted Answer

A)  The Continental Congress used the inflation tax to help finance the American Revolution. 
B)  The inflation is today a principal source of revenue for the U.S. government. 
C)  There is no way a person can avoid the inflation tax. 
D)  Governments can only raise revenues through taxation. 
A)  The Continental Congress used the inflation tax to help finance the American Revolution. 
B)  The inflation is today a principal source of revenue for the U.S. government. 
C)  There is no way a person can avoid the inflation tax. 
D)  Governments can only raise revenues through taxation.

Question 17

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

Accepted Answer

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

Question 18

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

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 19

The classical dichotomy argues that changes in the money supply

Accepted Answer

A)  affect both nominal and real variables. 
B)  affect neither nominal nor real variables. 
C)  affect nominal variables, but not real variables. 
D)  do not affect nominal variables, but do affect real variables. 
A)  affect both nominal and real variables. 
B)  affect neither nominal nor real variables. 
C)  affect nominal variables, but not real variables. 
D)  do not affect nominal variables, but do affect real variables.

Question 20

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Accepted Answer

rapid money supply g

Exam 22: Money Growth and Inflation

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

Between 1880 and 1886, prices that were

An increase in the price level causes the value of money to _____. Therefore, people will want to hold ____ money, because the cost of their purchases has increased.

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

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

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.

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

The price level rises if either

Inflation can be measured by the

When there is inflation, the number of dollars needed to buy a representative basket of goods

Velocity is computed as the

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.

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

Which of the following is correct?

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

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

The classical dichotomy argues that changes in the money supply

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters

An increase in the price level causes the value of money to _. Therefore, people will want to hold money, because the cost of their purchases has increased.

In the long run inflation is explained by . For countries that had hyperinflation this source of inflation arose primarily because the government .