Question 1

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

Accepted Answer

A) True 
 B)False

Question 2

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

Accepted Answer

A)  3.33. 
B)  0.83. 
C)  1.20. 
D)  13.33. 
A)  3.33. 
B)  0.83. 
C)  1.20. 
D)  13.33.

Question 3

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 4

The quantity theory of money can explain hyperinflations but not moderate inflation.

Accepted Answer

A) True 
 B)False

Question 5

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Accepted Answer

The answer of During hyperinflations, people desire to hold less...

Question 6

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 7

If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply

Accepted Answer

A)  decreases the price level by 2 percent. 
B)  decreases the price level by less than 2 percent. 
C)  increases the price level by less than 2 percent. 
D)  increases the price level by 2 percent. 
A)  decreases the price level by 2 percent. 
B)  decreases the price level by less than 2 percent. 
C)  increases the price level by less than 2 percent. 
D)  increases the price level by 2 percent.

Question 8

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

Accepted Answer

A)  the inflation rate and the nominal interest rate by the same number of percentage points. 
B)  nominal interest rates but by less than the percentage point increase in the inflation rate. 
C)  the inflation rate but not the nominal interest. 
D)  neither the inflation rate nor the nominal interest rate. 
A)  the inflation rate and the nominal interest rate by the same number of percentage points. 
B)  nominal interest rates but by less than the percentage point increase in the inflation rate. 
C)  the inflation rate but not the nominal interest. 
D)  neither the inflation rate nor the nominal interest rate.

Question 9

Economic variables whose values are measured in goods are called

Accepted Answer

A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables. 
A)  dichotomous variables. 
B)  nominal variables. 
C)  classical variables. 
D)  real variables.

Question 10

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Accepted Answer

A)  both the classical dichotomy and the quantity theory of money. 
B)  the classical dichotomy, but not the quantity theory of money. 
C)  the quantity theory of money, but not the classical dichotomy. 
D)  neither the classical dichotomy nor the quantity theory of money. 
A)  both the classical dichotomy and the quantity theory of money. 
B)  the classical dichotomy, but not the quantity theory of money. 
C)  the quantity theory of money, but not the classical dichotomy. 
D)  neither the classical dichotomy nor the quantity theory of money.

Question 11

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 12

Suppose that velocity rises while the money supply stays the same. It follows that

Accepted Answer

A)  P x Y must rise. 
B)  P x Y must fall. 
C)  P x Y must be unchanged. 
D)  the effects on P x Y are uncertain. 
A)  P x Y must rise. 
B)  P x Y must fall. 
C)  P x Y must be unchanged. 
D)  the effects on P x Y are uncertain.

Question 13

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 14

When the money market is drawn with the value of money on the vertical axis, if the money supply rises

Accepted Answer

A)  the price level and the value of money rise. 
B)  the price level rises and the value of money falls. 
C)  the price level falls and the value of money rises. 
D)  the price level and the value of money fall. 
A)  the price level and the value of money rise. 
B)  the price level rises and the value of money falls. 
C)  the price level falls and the value of money rises. 
D)  the price level and the value of money fall.

Question 15

If Y and M are constant and V doubles, the quantity equation implies that the price level

Accepted Answer

A)  falls to half its original level. 
B)  doubles. 
C)  more than doubles. 
D)  does not change. 
A)  falls to half its original level. 
B)  doubles. 
C)  more than doubles. 
D)  does not change.

Question 16

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 17

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

Question 18

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 19

Which of the following is accurate?

Accepted Answer

A)  Monetary policy is neutral in both the short run and the long run. 
B)  Though monetary policy is neutral in the long run, it may have effects on real variables in the short run. 
C)  Monetary policy has profound effects on real variables in both the short run and the long run. 
D)  Monetary policy has profound effects on real variables in the long run, but is neutral in the short run. 
A)  Monetary policy is neutral in both the short run and the long run. 
B)  Though monetary policy is neutral in the long run, it may have effects on real variables in the short run. 
C)  Monetary policy has profound effects on real variables in both the short run and the long run. 
D)  Monetary policy has profound effects on real variables in the long run, but is neutral in the short run.

Question 20

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

Accepted Answer

A)  raised both the price level and the value of gold in Cairo. 
B)  raised the price level, but decreased the value of gold in Cairo. 
C)  lowered the price level, but increased the value of gold in Cairo. 
D)  lowered both the price level and the value of gold in Cairo. 
A)  raised both the price level and the value of gold in Cairo. 
B)  raised the price level, but decreased the value of gold in Cairo. 
C)  lowered the price level, but increased the value of gold in Cairo. 
D)  lowered both the price level and the value of gold in Cairo.

Exam 30: Money Growth and Inflation

A person received 4% nominal interest. The inflation rate was -2% and the tax rate was 25%. This person received an after-tax real interest rate of 5%.

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

The quantity theory of money can explain hyperinflations but not moderate inflation.

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

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

If when the money supply changes, real output and velocity do not change, then a 2 percent increase in the money supply

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

Economic variables whose values are measured in goods are called

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

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.

Suppose that velocity rises while the money supply stays the same. It follows that

Open-market purchases by the Fed

When the money market is drawn with the value of money on the vertical axis, if the money supply rises

If Y and M are constant and V doubles, the quantity equation implies that the price level

The price of a Honda Accord

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

Inflation is problematic if

Which of the following is accurate?

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold

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 Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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.