Question 1

If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.

Accepted Answer

A) True 
 B)False

Question 2

In which case below does a person's purchasing power from saving increase the most?

Accepted Answer

A)  the nominal interest rate = 10% and inflation = 8% 
B)  the nominal interest rate = 9% and inflation = 6% 
C)  the nominal interest rate = 8% and inflation = 4% 
D)  the nominal interest rate = 7% and inflation = 2% 
A)  the nominal interest rate = 10% and inflation = 8% 
B)  the nominal interest rate = 9% and inflation = 6% 
C)  the nominal interest rate = 8% and inflation = 4% 
D)  the nominal interest rate = 7% and inflation = 2%

Question 3

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent 
A)  4 percent 
B)  6 percent 
C)  8 percent 
D)  10 percent

Question 4

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 5

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the

Accepted Answer

A)  right, lowering the price level. 
B)  right, raising the price level. 
C)  left, raising the price level. 
D)  left, lowering the price level. 
A)  right, lowering the price level. 
B)  right, raising the price level. 
C)  left, raising the price level. 
D)  left, lowering the price level.

Question 6

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Accepted Answer

The answer of In the early 1920s U.S. consumer prices...

Question 7

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)  either a rise in output or a rise in velocity. 
B)  either a rise in output or a fall in velocity. 
C)  either a fall in output or a rise in velocity. 
D)  either a fall in output or a fall in velocity. 
A)  either a rise in output or a rise in velocity. 
B)  either a rise in output or a fall in velocity. 
C)  either a fall in output or a rise in velocity. 
D)  either a fall in output or a fall in velocity.

Question 8

Governments may prefer an inflation tax to some other type of tax because the inflation tax

Accepted Answer

A)  is easier to impose. 
B)  reduces inflation. 
C)  falls mainly on high-income individuals. 
D)  reduces the real cost of government expenditure. 
A)  is easier to impose. 
B)  reduces inflation. 
C)  falls mainly on high-income individuals. 
D)  reduces the real cost of government expenditure.

Question 9

If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

Accepted Answer

A) True 
 B)False

Question 10

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 11

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Accepted Answer

The nominal interest

Question 12

Relative-price variability

Accepted Answer

A)  rises with inflation, leading to an improved allocation of resources. 
B)  rises with inflation, leading to a misallocation of resources. 
C)  falls with inflation, leading to an improved allocation of resources. 
D)  falls with inflation, leading to a misallocation of resources. 
A)  rises with inflation, leading to an improved allocation of resources. 
B)  rises with inflation, leading to a misallocation of resources. 
C)  falls with inflation, leading to an improved allocation of resources. 
D)  falls with inflation, leading to a misallocation of resources.

Question 13

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Accepted Answer

A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value. 
A)  is 1.5 times its old value. 
B)  is 3 times its old value. 
C)  is 6 times its old value. 
D)  is the same as its old value.

Question 14

In United States history there were long periods when most prices fell.

Accepted Answer

A) True 
 B)False

Question 15

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Accepted Answer

A)  People who held money would feel poorer. 
B)  Prices would rise. 
C)  People who had lent money at a fixed interest rate would feel poorer. 
D)  All of the above are correct. 
A)  People who held money would feel poorer. 
B)  Prices would rise. 
C)  People who had lent money at a fixed interest rate would feel poorer. 
D)  All of the above are correct.

Question 16

If the price level last year was 180 and this year it is 176, then

Accepted Answer

A)  there was inflation of 2.3 percent. 
B)  there was inflation of 4.0 percent. 
C)  there was deflation of 2.2 percent. 
D)  there was deflation of 4.0 percent. 
A)  there was inflation of 2.3 percent. 
B)  there was inflation of 4.0 percent. 
C)  there was deflation of 2.2 percent. 
D)  there was deflation of 4.0 percent.

Question 17

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Accepted Answer

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

Question 18

Open-market purchases by the Fed make the money supply

Accepted Answer

A)  increase, which makes the value of money increase. 
B)  increase, which makes the value of money decrease. 
C)  decrease, which makes the value of money decrease. 
D)  decrease, which makes the value of money increase. 
A)  increase, which makes the value of money increase. 
B)  increase, which makes the value of money decrease. 
C)  decrease, which makes the value of money decrease. 
D)  decrease, which makes the value of money increase.

Question 19

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 17: Money Growth and Inflation

If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level increases.

In which case below does a person's purchasing power from saving increase the most?

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

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?

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Governments may prefer an inflation tax to some other type of tax because the inflation tax

If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

Open-market purchases by the Fed

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Relative-price variability

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

In United States history there were long periods when most prices fell.

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

If the price level last year was 180 and this year it is 176, then

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Open-market purchases by the Fed make the money supply

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

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

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

Filters

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.