Question 1

Which of the following statements about inflation is correct?

Accepted Answer

A)  Evidence from studies indicates that, in U.S. newspapers, inflation is mentioned less frequently than other economic terms, such as unemployment and productivity. 
B)  People believe the inflation fallacy because they tend to believe too strongly in the principle of monetary neutrality. 
C)  Nominal incomes are determined by nominal factors; they are not affected by real factors. 
D)  Inflation does not in itself reduce people's real purchasing power. 
A)  Evidence from studies indicates that, in U.S. newspapers, inflation is mentioned less frequently than other economic terms, such as unemployment and productivity. 
B)  People believe the inflation fallacy because they tend to believe too strongly in the principle of monetary neutrality. 
C)  Nominal incomes are determined by nominal factors; they are not affected by real factors. 
D)  Inflation does not in itself reduce people's real purchasing power.

Question 2

In the U.S., from the early 1980s through the early 1990s,

Accepted Answer

A)  both inflation and nominal interest rates rose. 
B)  both inflation and nominal interest rates fell. 
C)  the inflation rate fell and the nominal interest rate rose. 
D)  the inflation rate rose and the nominal interest rate fell. 
A)  both inflation and nominal interest rates rose. 
B)  both inflation and nominal interest rates fell. 
C)  the inflation rate fell and the nominal interest rate rose. 
D)  the inflation rate rose and the nominal interest rate fell.

Question 3

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 4

The inflation rate is measured as the percentage change in a price index.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right. 
A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right.

Question 6

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 7

According to the classical dichotomy, which of the following is influenced by monetary factors?

Accepted Answer

A)  nominal wages 
B)  unemployment 
C)  real GDP 
D)  All of the above are correct. 
A)  nominal wages 
B)  unemployment 
C)  real GDP 
D)  All of the above are correct.

Question 8

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 9

You put money in the bank. The increase in the dollar value of your savings

Accepted Answer

A)  and the change in the number of goods you can buy with your savings are both nominal variables. 
B)  and the change in the number of goods you can buy with your savings are both real variables. 
C)  is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable. 
D)  is a real variable, but the change in the number of goods you buy with your savings is a nominal variable. 
A)  and the change in the number of goods you can buy with your savings are both nominal variables. 
B)  and the change in the number of goods you can buy with your savings are both real variables. 
C)  is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable. 
D)  is a real variable, but the change in the number of goods you buy with your savings is a nominal variable.

Question 10

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Accepted Answer

A)  shifts right, causing the price level to rise. 
B)  shifts right, causing the price level to fall. 
C)  shifts left, causing the price level to rise. 
D)  shifts left, causing the price level to fall. 
A)  shifts right, causing the price level to rise. 
B)  shifts right, causing the price level to fall. 
C)  shifts left, causing the price level to rise. 
D)  shifts left, causing the price level to fall.

Question 11

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 interpreted as the inflation rate. 
C)  the supply of money influences the value of P, but the demand for money does not. 
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 interpreted as the inflation rate. 
C)  the supply of money influences the value of P, but the demand for money does not. 
D)  All of the above are correct.

Question 12

An excess supply of money is eliminated by a decrease in the value of money.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Accepted Answer

A)  Y or V rise 
B)  Y or V fall 
C)  Y rises or V falls 
D)  Y falls or V rises 
A)  Y or V rise 
B)  Y or V fall 
C)  Y rises or V falls 
D)  Y falls or V rises

Question 14

A decrease in the overall price level or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

Accepted Answer

deflation,

Question 15

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 16

If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.

Accepted Answer

A) True 
 B)False

Question 17

As the Consumer Price Index increases, the value of money

Accepted Answer

A)  falls, so people hold more money to buy the goods and services they want. 
B)  falls, so people hold less money to buy the goods and services they want. 
C)  rises, so people hold more money to buy the goods and services they want. 
D)  rises, so people hold less money to buy the goods and services they want. 
A)  falls, so people hold more money to buy the goods and services they want. 
B)  falls, so people hold less money to buy the goods and services they want. 
C)  rises, so people hold more money to buy the goods and services they want. 
D)  rises, so people hold less money to buy the goods and services they want.

Question 18

When inflation causes relative-price variability,

Accepted Answer

A)  consumer decisions are distorted and the ability of markets to efficiently allocate factors of production is impaired. 
B)  consumer decisions are distorted, but markets are still able to efficiently allocate factors of production. 
C)  consumer decisions are not distorted, but the ability of markets to efficiently allocate factors of production is impaired. 
D)  consumer decisions are not distorted and markets are still able to efficiently allocate factors of production. 
A)  consumer decisions are distorted and the ability of markets to efficiently allocate factors of production is impaired. 
B)  consumer decisions are distorted, but markets are still able to efficiently allocate factors of production. 
C)  consumer decisions are not distorted, but the ability of markets to efficiently allocate factors of production is impaired. 
D)  consumer decisions are not distorted and markets are still able to efficiently allocate factors of production.

Question 19

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

Accepted Answer

A)  menu costs and shoeleather costs 
B)  menu costs but not shoeleather costs 
C)  shoeleather costs but not menu costs 
D)  menu costs but  shoeleather costs 
A)  menu costs and shoeleather costs 
B)  menu costs but not shoeleather costs 
C)  shoeleather costs but not menu costs 
D)  menu costs but  shoeleather costs

Question 20

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Exam 22: Money Growth and Inflation

Which of the following statements about inflation is correct?

In the U.S., from the early 1980s through the early 1990s,

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 .

The inflation rate is measured as the percentage change in a price index.

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

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

According to the classical dichotomy, which of the following is influenced by monetary factors?

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

You put money in the bank. The increase in the dollar value of your savings

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

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

An excess supply of money is eliminated by a decrease in the value of money.

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

A decrease in the overall price level or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

The source of hyperinflations is primarily

If the quantity of money demanded is greater than the quantity supplied, then the value of money rises.

As the Consumer Price Index increases, the value of money

When inflation causes relative-price variability,

Which of the following are costs incurred by people trying to protect themselves from the effects of inflation?

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

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

A decrease in the overall price level or falling prices) is called _. An extraordinarily high rate of inflation is called _.