Question 1

In the last part of the 1800's

Accepted Answer

A)  deflation made it harder for farmers to pay off their debt. 
B)  deflation made it easier for farmers to pay off their debt. 
C)  inflation made it harder for farmers to pay off their debt. 
D)  inflation made it easier for farmers to pay off their debt. 
A)  deflation made it harder for farmers to pay off their debt. 
B)  deflation made it easier for farmers to pay off their debt. 
C)  inflation made it harder for farmers to pay off their debt. 
D)  inflation made it easier for farmers to pay off their debt.

Question 2

The Fisher effect is crucial for understanding changes over time in

Accepted Answer

A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the unemployment rate. 
A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the unemployment rate.

Question 3

Which movie is an allegory about late 19th century monetary policy?

Accepted Answer

A)  The Wizard of Oz 
B)  Mary Poppins 
C)  It's a Wonderful Life 
D)  Trading Places 
A)  The Wizard of Oz 
B)  Mary Poppins 
C)  It's a Wonderful Life 
D)  Trading Places

Question 4

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 5

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Accepted Answer

M x V = P

Question 6

What are menu costs and why does high inflation increase menu costs?

Accepted Answer

Menu costs are the costs of ch

Question 7

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Accepted Answer

A)  5.25 percent 
B)  5 percent 
C)  2.3 percent 
D)  2 percent 
A)  5.25 percent 
B)  5 percent 
C)  2.3 percent 
D)  2 percent

Question 8

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Accepted Answer

A)  The nominal interest rate was 13.5 percent and the inflation rate was 7.5 percent. 
B)  The nominal interest rate was 13.5 percent and the inflation rate was 1.5 percent. 
C)  The nominal interest rate was 6 percent and the inflation rate was -1.5 percent. 
D)  The nominal interest rate was 6 percent and the inflation rate was 7.5 percent. 
A)  The nominal interest rate was 13.5 percent and the inflation rate was 7.5 percent. 
B)  The nominal interest rate was 13.5 percent and the inflation rate was 1.5 percent. 
C)  The nominal interest rate was 6 percent and the inflation rate was -1.5 percent. 
D)  The nominal interest rate was 6 percent and the inflation rate was 7.5 percent.

Question 9

Other things the same, an increase in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls. 
A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls.

Question 10

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Accepted Answer

He was expecting it

Question 11

Figure 30-1  
-Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)  the equilibrium value of money decreases. 
B)  the equilibrium price level decreases. 
C)  the supply of money has decreased. 
D)  the demand for goods and services will decrease. 
A)  the equilibrium value of money decreases. 
B)  the equilibrium price level decreases. 
C)  the supply of money has decreased. 
D)  the demand for goods and services will decrease.

Question 12

As the price level falls, the value of money falls.

Accepted Answer

A) True 
 B)False

Question 13

The consumer price index increases from 200 to 208. What is the inflation rate?

Accepted Answer

The answer of The consumer price index increases from 200...

Question 14

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Accepted Answer

A)  2.4 percent. 
B)  3.5 percent. 
C)  8.5 percent. 
D)  15 percent. 
A)  2.4 percent. 
B)  3.5 percent. 
C)  8.5 percent. 
D)  15 percent.

Question 15

A decrease in the money supply creates an excess

Accepted Answer

A)  supply of money that is eliminated by rising prices. 
B)  supply of money that is eliminated by falling prices. 
C)  demand for money that is eliminated by rising prices. 
D)  demand for money that is eliminated by falling prices. 
A)  supply of money that is eliminated by rising prices. 
B)  supply of money that is eliminated by falling prices. 
C)  demand for money that is eliminated by rising prices. 
D)  demand for money that is eliminated by falling prices.

Question 16

Inflation is problematic if

Accepted Answer

A)  it is less than the percentage increase in nominal income. 
B)  it is less than the nominal return on saving. 
C)  it equals the growth rate of real GDP in the long run. 
D)  it distorts relative prices, causing a misallocation of resources. 
A)  it is less than the percentage increase in nominal income. 
B)  it is less than the nominal return on saving. 
C)  it equals the growth rate of real GDP in the long run. 
D)  it distorts relative prices, causing a misallocation of resources.

Question 17

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Accepted Answer

A)  both a nominal gain and a real gain, and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain, and you paid taxes only on the real gain. 
C)  a nominal gain and a real loss, and you paid taxes on the nominal gain. 
D)  a nominal gain and a real loss, and you paid no taxes on the transaction. 
A)  both a nominal gain and a real gain, and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain, and you paid taxes only on the real gain. 
C)  a nominal gain and a real loss, and you paid taxes on the nominal gain. 
D)  a nominal gain and a real loss, and you paid no taxes on the transaction.

Question 18

Suppose ice cream cones costs $3. Molly holds $60. What is the real value of the money she holds?

Accepted Answer

A)  $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold more dollars. 
B)  $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold fewer dollars. 
C)  20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold more dollars. 
D)  20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold fewer dollars. 
A)  $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold more dollars. 
B)  $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold fewer dollars. 
C)  20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold more dollars. 
D)  20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

Question 19

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 20

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Accepted Answer

A) True 
 B)False

Exam 22: Money Growth and Inflation

In the last part of the 1800's

The Fisher effect is crucial for understanding changes over time in

Which movie is an allegory about late 19th century monetary policy?

The price of a Honda Accord

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

What are menu costs and why does high inflation increase menu costs?

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Other things the same, an increase in velocity means that

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Figure 30-1 -Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

As the price level falls, the value of money falls.

The consumer price index increases from 200 to 208. What is the inflation rate?

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

A decrease in the money supply creates an excess

Inflation is problematic if

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Suppose ice cream cones costs $3. Molly holds $60. What is the real value of the money she holds?

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

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

The quantity equation is expressed as _. The rate at which money changes hands is known as _.