Question 1

If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.

Accepted Answer

A) True 
 B)False

Question 2

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 3

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. You compute the price of jeans relative to tee-shirts.

Accepted Answer

A)  The dollar price of jeans and the relative price of jeans are both nominal variables. 
B)  The dollar price of jeans and the relative price of jeans are both real variables. 
C)  The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable. 
D)  The dollar price of jeans is a real variable; the relative price of jeans is a nominal variable. 
A)  The dollar price of jeans and the relative price of jeans are both nominal variables. 
B)  The dollar price of jeans and the relative price of jeans are both real variables. 
C)  The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable. 
D)  The dollar price of jeans is a real variable; the relative price of jeans is a nominal variable.

Question 4

Nominal GDP measures

Accepted Answer

A)  the total quantity of final goods and services produced. 
B)  the dollar value of the economy's output of final goods and services. 
C)  the total income received from producing final goods and services measured in constant dollars. 
D)  the overall level of prices. 
A)  the total quantity of final goods and services produced. 
B)  the dollar value of the economy's output of final goods and services. 
C)  the total income received from producing final goods and services measured in constant dollars. 
D)  the overall level of prices.

Question 5

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

Accepted Answer

A)  the quantity of money demanded and the quantity of money supplied 
B)  the quantity of money demanded but not the quantity of money supplied 
C)  the quantity of money supplied but not the quantity of money demanded 
D)  neither the quantity of money supplied nor the quantity of money demanded 
A)  the quantity of money demanded and the quantity of money supplied 
B)  the quantity of money demanded but not the quantity of money supplied 
C)  the quantity of money supplied but not the quantity of money demanded 
D)  neither the quantity of money supplied nor the quantity of money demanded

Question 6

The price level rises if either

Accepted Answer

A)  money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a rise in the value of money. 
B)  money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a fall in the value of money. 
C)  money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a rise in the value of money. 
D)  money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a fall in the value of money. 
A)  money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a rise in the value of money. 
B)  money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a fall in the value of money. 
C)  money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a rise in the value of money. 
D)  money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a fall in the value of money.

Question 7

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

Accepted Answer

A)  Austria in the 1920's. 
B)  Hungary in the 1920's. 
C)  Poland in the 1920's. 
D)  All of the above are correct. 
A)  Austria in the 1920's. 
B)  Hungary in the 1920's. 
C)  Poland in the 1920's. 
D)  All of the above are correct.

Question 8

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 9

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

Accepted Answer

A)  upward sloping because people supply a larger quantity of money when the value of money increases. 
B)  downward sloping because people supply a larger quantity of money when the value of money decreases. 
C)  horizontal because we assume the central bank controls the money supply 
D)  vertical because we assume the central bank controls the money supply. 
A)  upward sloping because people supply a larger quantity of money when the value of money increases. 
B)  downward sloping because people supply a larger quantity of money when the value of money decreases. 
C)  horizontal because we assume the central bank controls the money supply 
D)  vertical because we assume the central bank controls the money supply.

Question 10

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 11

Market economies rely on which of the following to allocate scarce resources?

Accepted Answer

A)  government 
B)  consumers 
C)  relative prices 
D)  real interest rates 
A)  government 
B)  consumers 
C)  relative prices 
D)  real interest rates

Question 12

The primary reason people hold money is

Accepted Answer

A)  to keep wealth in a less liquid form. 
B)  to use it as a medium of exchange. 
C)  to use it for investment. 
D)  to earn interest. 
A)  to keep wealth in a less liquid form. 
B)  to use it as a medium of exchange. 
C)  to use it for investment. 
D)  to earn interest.

Question 13

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 14

When the money market is drawn with the value of money on the vertical axis, if there is a shortage of money then

Accepted Answer

A)  the value of money rises which will make people desire to hold more money. 
B)  the value of money rises which will make people desire to hold less money. 
C)  the value of money falls which will make people desire to hold more money. 
D)  the value of money falls which will make people desire to hold less money. 
A)  the value of money rises which will make people desire to hold more money. 
B)  the value of money rises which will make people desire to hold less money. 
C)  the value of money falls which will make people desire to hold more money. 
D)  the value of money falls which will make people desire to hold less money.

Question 15

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Accepted Answer

A)  $4,000. 
B)  $2,250. 
C)  $250. 
D)  $36,000. 
A)  $4,000. 
B)  $2,250. 
C)  $250. 
D)  $36,000.

Question 16

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Accepted Answer

fallen, mo

Question 17

Which country is correctly matched with its 2009 inflation rate?

Accepted Answer

A)  9 percent inflation in the United States. 
B)  3.6 percent inflation in Russia. 
C)  59 percent inflation in Venezuela. 
D)  9.3 percent inflation in India. 
A)  9 percent inflation in the United States. 
B)  3.6 percent inflation in Russia. 
C)  59 percent inflation in Venezuela. 
D)  9.3 percent inflation in India.

Question 18

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 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. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

Accepted Answer

A)  0.5 and the equilibrium value of money is 2. 
B)  2 and the equilibrium value of money is 0.5. 
C)  0.5 and the equilibrium value of money cannot be determined from the graph. 
D)  2 and the equilibrium value of money cannot be determined from the graph. 
A)  0.5 and the equilibrium value of money is 2. 
B)  2 and the equilibrium value of money is 0.5. 
C)  0.5 and the equilibrium value of money cannot be determined from the graph. 
D)  2 and the equilibrium value of money cannot be determined from the graph.

Question 20

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.

Exam 17: Money Growth and Inflation

If inflation is higher than expected, then borrowers make nominal interest payments that are less than they expected.

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. You compute the price of jeans relative to tee-shirts.

Nominal GDP measures

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

The price level rises if either

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

The source of hyperinflations is primarily

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

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

Market economies rely on which of the following to allocate scarce resources?

The primary reason people hold money is

The price level rises if either

When the money market is drawn with the value of money on the vertical axis, if there is a shortage of money then

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Which country is correctly matched with its 2009 inflation rate?

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

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. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

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

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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When the consumer price index increases, the value of your money has _. According to the quantity theory of money this is caused by an increase in the _.