Question 1

The term hyperinflation refers to

Accepted Answer

A)  the spread of inflation from one country to others. 
B)  a decrease in the inflation rate. 
C)  a period of very high inflation. 
D)  inflation accompanied by a recession. 
A)  the spread of inflation from one country to others. 
B)  a decrease in the inflation rate. 
C)  a period of very high inflation. 
D)  inflation accompanied by a recession.

Question 2

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 3

When inflation rises, people will desire to hold

Accepted Answer

A)  less money and will go to the bank less frequently. 
B)  less money and will go to the bank more frequently. 
C)  more money and will go to the bank less frequently. 
D)  more money and will go to the bank more frequently. 
A)  less money and will go to the bank less frequently. 
B)  less money and will go to the bank more frequently. 
C)  more money and will go to the bank less frequently. 
D)  more money and will go to the bank more frequently.

Question 4

The costs of changing price tags and price listings are known as

Accepted Answer

A)  inflation-induced tax distortions. 
B)  relative-price variability costs. 
C)  shoeleather costs. 
D)  menu costs. 
A)  inflation-induced tax distortions. 
B)  relative-price variability costs. 
C)  shoeleather costs. 
D)  menu costs.

Question 5

Shoeleather costs and menu costs are both costs of anticipated inflation.

Accepted Answer

A) True 
 B)False

Question 6

When Haley states that inflation by itself always reduces the real return on her saving, she

Accepted Answer

A)  has expressed the idea of the inflation tax. 
B)  has expressed the idea behind menu costs. 
C)  has committed the inflation fallacy. 
D)  has expressed the idea behind shoeleather costs. 
A)  has expressed the idea of the inflation tax. 
B)  has expressed the idea behind menu costs. 
C)  has committed the inflation fallacy. 
D)  has expressed the idea behind shoeleather costs.

Question 7

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 8

In which case is velocity the highest?

Accepted Answer

A)  the price level equals 4, the money supply equals 5,000, and output equals 20,000. 
B)  the price level equals 4, the money supply equals 20,000 and output equals 5,000. 
C)  the price level equals 2, the money supply equals 5,000, and output equals 20,000. 
D)  the price level equals 2, the money supply equals 20,000 and output equals 5,000. 
A)  the price level equals 4, the money supply equals 5,000, and output equals 20,000. 
B)  the price level equals 4, the money supply equals 20,000 and output equals 5,000. 
C)  the price level equals 2, the money supply equals 5,000, and output equals 20,000. 
D)  the price level equals 2, the money supply equals 20,000 and output equals 5,000.

Question 9

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached

Accepted Answer

A)  60 percent. 
B)  80 percent. 
C)  220 percent. 
D)  24,000 percent. 
A)  60 percent. 
B)  80 percent. 
C)  220 percent. 
D)  24,000 percent.

Question 10

The value of money falls. This might be because the Federal Reserve

Accepted Answer

A)  bought bonds, which increased the money supply. 
B)  bought bonds, which decreased the money supply. 
C)  sold bonds, which increased the money supply. 
D)  sold bonds, which decreased the money supply. 
A)  bought bonds, which increased the money supply. 
B)  bought bonds, which decreased the money supply. 
C)  sold bonds, which increased the money supply. 
D)  sold bonds, which decreased the money supply.

Question 11

The data on hyperinflation show a clear link between the quantity of money and

Accepted Answer

A)  the price level. 
B)  growth rate of GDP. 
C)  unemployment rate. 
D)  velocity. 
A)  the price level. 
B)  growth rate of GDP. 
C)  unemployment rate. 
D)  velocity.

Question 12

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Accepted Answer

A) True 
 B)False

Question 13

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 14

The country of Lessidinia has a tax system identical to that of the United States. Suppose someone in Lessidinia bought a parcel of land for 20,000 foci the local currency) in 1960 when the price index equaled 100. In 2002, the person sold the land for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20 percent. Compute the taxes on the nominal gain and the change in the real value of the land in terms of 2002 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)  -60 percent 
B)  -30 percent 
C)  30 percent 
D)  60 percent 
A)  -60 percent 
B)  -30 percent 
C)  30 percent 
D)  60 percent

Question 15

Which of the following statements concerning the history of U.S. inflation is not correct?

Accepted Answer

A)  Prices rose at an average annual rate of about 3.6 percent over the last 80 years. 
B)  There was about a 17-fold increase in the price level over the last 80 years. 
C)  Inflation in the 1970s was below the average over the last 80 years. 
D)  The United States has experienced periods of deflation. 
A)  Prices rose at an average annual rate of about 3.6 percent over the last 80 years. 
B)  There was about a 17-fold increase in the price level over the last 80 years. 
C)  Inflation in the 1970s was below the average over the last 80 years. 
D)  The United States has experienced periods of deflation.

Question 16

An economy produces two goods, x and y. A year ago the price of x was $4 and the price of y was $6. Today the price of x is $8 and the price of y is $10. What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?

Accepted Answer

Both the nominal and real valu

Question 17

The increase in the overall level of prices is known as .

Accepted Answer

The answer of The increase in the overall level of...

Question 18

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 19

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. What quantity is measured along the vertical axis?

Accepted Answer

A)  the price level 
B)  the velocity of money 
C)  the value of money 
D)  the quantity of money 
A)  the price level 
B)  the velocity of money 
C)  the value of money 
D)  the quantity of money

Question 20

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

Accepted Answer

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

Exam 17: Money Growth and Inflation

The term hyperinflation refers to

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

When inflation rises, people will desire to hold

The costs of changing price tags and price listings are known as

Shoeleather costs and menu costs are both costs of anticipated inflation.

When Haley states that inflation by itself always reduces the real return on her saving, she

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

In which case is velocity the highest?

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached

The value of money falls. This might be because the Federal Reserve

The data on hyperinflation show a clear link between the quantity of money and

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

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 statements concerning the history of U.S. inflation is not correct?

An economy produces two goods, x and y. A year ago the price of x was $4 and the price of y was $6. Today the price of x is $8 and the price of y is $10. What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?

The increase in the overall level of prices is known as .

The supply of money increases when

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. What quantity is measured along the vertical axis?

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

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

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

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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