Question 1

When there is inflation, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)  increases, and so the value of money rises. 
B)  increases, and so the value of money falls. 
C)  decreases, and so the value of money rises. 
D)  decreases, and so the value of money falls 
A)  increases, and so the value of money rises. 
B)  increases, and so the value of money falls. 
C)  decreases, and so the value of money rises. 
D)  decreases, and so the value of money falls

Question 2

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

Accepted Answer

A)  nominal and real GDP would fall by 7 percent. 
B)  nominal GDP would fall by 7 percent; real GDP would be unchanged. 
C)  nominal GDP would be unchanged; real GDP would fall by 7 percent. 
D)  neither nominal GDP nor real GDP would change. 
A)  nominal and real GDP would fall by 7 percent. 
B)  nominal GDP would fall by 7 percent; real GDP would be unchanged. 
C)  nominal GDP would be unchanged; real GDP would fall by 7 percent. 
D)  neither nominal GDP nor real GDP would change.

Question 3

Which of the following is an example of menu costs?

Accepted Answer

A)  deciding on new prices 
B)  printing new price lists 
C)  advertising new prices 
D)  All of the above are examples of menu costs. 
A)  deciding on new prices 
B)  printing new price lists 
C)  advertising new prices 
D)  All of the above are examples of menu costs.

Question 4

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  4.5. 
A)  1. 
B)  1.5. 
C)  2. 
D)  4.5.

Question 5

Which of the following is correct?

Accepted Answer

A)  If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. 
B)  If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. 
C)  If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right. 
D)  If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right. 
A)  If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. 
B)  If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve. 
C)  If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right. 
D)  If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.

Question 6

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Accepted Answer

A)  real output only. 
B)  nominal output only. 
C)  the price level only. 
D)  both the price level and nominal output. 
A)  real output only. 
B)  nominal output only. 
C)  the price level only. 
D)  both the price level and nominal output.

Question 7

If inflation is less than expected, who is wealth redistributed to?

Accepted Answer

The answer of If inflation is less than expected, who...

Question 8

In the long run, money demand and money supply determine

Accepted Answer

A)  the value of money and the real interest rate. 
B)  the value of money but not the real interest rate. 
C)  the real interest rate but not the value of money. 
D)  neither the value of money nor the real interest rate. 
A)  the value of money and the real interest rate. 
B)  the value of money but not the real interest rate. 
C)  the real interest rate but not the value of money. 
D)  neither the value of money nor the real interest rate.

Question 9

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Accepted Answer

A)  Y rose, V rose 
B)  Y fell, V fell 
C)  Y rose, V fell 
D)  Y fell, V rose 
A)  Y rose, V rose 
B)  Y fell, V fell 
C)  Y rose, V fell 
D)  Y fell, V rose

Question 10

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Accepted Answer

The after- tax nominal interes

Question 11

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Accepted Answer

A)  inflation averaged 8% per year and the real rate of return was 9%. 
B)  inflation averaged 11% per year and the real rate of return was 17%. 
C)  inflation averaged 5% per year and the real rate of return was 4%. 
D)  inflation averaged 1% per year and the real rate of return was 6%. 
A)  inflation averaged 8% per year and the real rate of return was 9%. 
B)  inflation averaged 11% per year and the real rate of return was 17%. 
C)  inflation averaged 5% per year and the real rate of return was 4%. 
D)  inflation averaged 1% per year and the real rate of return was 6%.

Question 12

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

Accepted Answer

debtors/bo

Question 13

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Accepted Answer

A)  The $80 is a real variable. The quantity of shoes is a nominal variable. 
B)  The $80 is a nominal variable. The quantity of shoes is a real variable. 
C)  Both the $80 and the quantity of shoes are nominal variables. 
D)  Both the $80 and the quantity of shoes are real variables. 
A)  The $80 is a real variable. The quantity of shoes is a nominal variable. 
B)  The $80 is a nominal variable. The quantity of shoes is a real variable. 
C)  Both the $80 and the quantity of shoes are nominal variables. 
D)  Both the $80 and the quantity of shoes are real variables.

Question 14

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Accepted Answer

A)  the price level and velocity. 
B)  the price level but not velocity. 
C)  velocity but not the price level. 
D)  neither the price level nor velocity. 
A)  the price level and velocity. 
B)  the price level but not velocity. 
C)  velocity but not the price level. 
D)  neither the price level nor velocity.

Question 15

When inflation rises, the nominal interest rate

Accepted Answer

A)  rises, and people desire to hold more money. 
B)  rises, and people desire to hold less money. 
C)  falls, and people desire to hold more money. 
D)  falls, and people desire to hold less money 
A)  rises, and people desire to hold more money. 
B)  rises, and people desire to hold less money. 
C)  falls, and people desire to hold more money. 
D)  falls, and people desire to hold less money

Question 16

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.  
-Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to

Accepted Answer

A)  2,500. 
B)  7,500. 
C)  10,000. 
D)  40,000. 
A)  2,500. 
B)  7,500. 
C)  10,000. 
D)  40,000.

Question 17

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

Accepted Answer

A)  The price level and velocity are both 8. 
B)  The price level is 2 and velocity is 8. 
C)  The price level and velocity are both 4. 
D)  The price level is 4 and velocity is 8. 
A)  The price level and velocity are both 8. 
B)  The price level is 2 and velocity is 8. 
C)  The price level and velocity are both 4. 
D)  The price level is 4 and velocity is 8.

Question 18

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

Accepted Answer

A)  6 
B)  1.5 
C)  0.67 
D)  0.167 
A)  6 
B)  1.5 
C)  0.67 
D)  0.167

Question 19

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

Accepted Answer

A)  M = $500, V = 4. 
B)  M = $250, V = 8. 
C)  M = $1,000, V = 2. 
D)  All of the above are correct. 
A)  M = $500, V = 4. 
B)  M = $250, V = 8. 
C)  M = $1,000, V = 2. 
D)  All of the above are correct.

Question 20

When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through an) _____ in the price level.

Accepted Answer

The answer of When the Federal Reserve injects money into...

Exam 17: Money Growth and Inflation

When there is inflation, the number of dollars needed to buy a representative basket of goods

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

Which of the following is an example of menu costs?

Based on the quantity equation, if M = 100, V = 3, and Y = 150, then P =

Which of the following is correct?

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

If inflation is less than expected, who is wealth redistributed to?

In the long run, money demand and money supply determine

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

If the inflation rate was 10%, and the tax rate was 25%, and you deposited money in a bank account that paid 14%, what is after tax real interest rate? Show you work.

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

When inflation rises, the nominal interest rate

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

If P = 2 and Y = 1000, then which of the following pairs of values are possible?

When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through an) _____ in 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

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _ to _.

When the Federal Reserve injects money into the banking system, it initially causes an excess _ of money. Equilibrium in the money market is reestablished through an) _ in the price level.