Question 1

The costs a business incurs to change its prices are called .

Accepted Answer

The answer of The costs a business incurs to change...

Question 2

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Accepted Answer

An increase in inflation reduc

Question 3

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

Accepted Answer

A)  the price level and nominal GDP 
B)  the price level and real GDP 
C)  only real GDP 
D)  only the price level 
A)  the price level and nominal GDP 
B)  the price level and real GDP 
C)  only real GDP 
D)  only the price level

Question 4

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

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

Question 5

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 6

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Accepted Answer

A)  both a nominal gain and a real gain, and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain, and you paid taxes only on the real gain. 
C)  a nominal gain, but no real gain, and you paid taxes on the nominal gain. 
D)  a nominal gain, but no real gain, and you paid no taxes on the transaction. 
A)  both a nominal gain and a real gain, and you paid taxes on the nominal gain. 
B)  both a nominal gain and a real gain, and you paid taxes only on the real gain. 
C)  a nominal gain, but no real gain, and you paid taxes on the nominal gain. 
D)  a nominal gain, but no real gain, and you paid no taxes on the transaction.

Question 7

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Accepted Answer

A)  higher than she had expected, and the real value of the loan is higher than she had expected. 
B)  higher than she had expected, and the real value of the loan is lower than she had expected. 
C)  lower than she had expected, and the real value of the loan is higher than she had expected. 
D)  lower then she had expected, and the real value of the loan is lower than she had expected. 
A)  higher than she had expected, and the real value of the loan is higher than she had expected. 
B)  higher than she had expected, and the real value of the loan is lower than she had expected. 
C)  lower than she had expected, and the real value of the loan is higher than she had expected. 
D)  lower then she had expected, and the real value of the loan is lower than she had expected.

Question 8

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Accepted Answer

A)  two percent and prices fell one percent. 
B)  two percent and prices rose one percent. 
C)  three percent and prices rose one percent. 
D)  three percent and prices fell one percent. 
A)  two percent and prices fell one percent. 
B)  two percent and prices rose one percent. 
C)  three percent and prices rose one percent. 
D)  three percent and prices fell one percent.

Question 9

Which of the following is correct?

Accepted Answer

A)  A period of hyperinflation is a period of extraordinarily low inflation. 
B)  A period of deflation is any period during which the inflation rate is decreasing. 
C)  From 2002 to 2012, U.S. inflation averaged about 2.5 percent per year. 
D)  All of the above are correct. 
A)  A period of hyperinflation is a period of extraordinarily low inflation. 
B)  A period of deflation is any period during which the inflation rate is decreasing. 
C)  From 2002 to 2012, U.S. inflation averaged about 2.5 percent per year. 
D)  All of the above are correct.

Question 10

When the money market is drawn with the value of money on the vertical axis, the price level decreases if

Accepted Answer

A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right. 
A)  either money demand or money supply shifts right. 
B)  either money demand or money supply shifts left. 
C)  money demand shifts right or money supply shifts left. 
D)  money demand shifts left or money supply shifts right.

Question 11

If inflation is lower than what was expected,

Accepted Answer

A)  creditors receive a lower real interest rate than they had anticipated. 
B)  creditors pay a lower real interest rate than they had anticipated. 
C)  debtors receive a higher real interest rate than they had anticipated. 
D)  debtors pay a higher real interest rate than they had anticipated. 
A)  creditors receive a lower real interest rate than they had anticipated. 
B)  creditors pay a lower real interest rate than they had anticipated. 
C)  debtors receive a higher real interest rate than they had anticipated. 
D)  debtors pay a higher real interest rate than they had anticipated.

Question 12

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 13

As the price level falls, the value of money falls.

Accepted Answer

A) True 
 B)False

Question 14

If there is inflation, then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)  high relative price. Relative-price variability rises as the inflation rate rises. 
B)  high relative price. Relative-price variability falls as the inflation rate rises. 
C)  low relative price. Relative-price variability rises as the inflation rate rises. 
D)  low relative price. Relative-price variability falls as the inflation rate rises. 
A)  high relative price. Relative-price variability rises as the inflation rate rises. 
B)  high relative price. Relative-price variability falls as the inflation rate rises. 
C)  low relative price. Relative-price variability rises as the inflation rate rises. 
D)  low relative price. Relative-price variability falls as the inflation rate rises.

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

According to the Fisher effect, if inflation rises then the nominal interest rate rises.

Accepted Answer

A) True 
 B)False

Question 17

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 18

In which of the following cases is the after-tax real interest rate highest?

Accepted Answer

A)  inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%. 
B)  inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 25%. 
C)  inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 20%. 
D)  inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 25%. 
A)  inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%. 
B)  inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 25%. 
C)  inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 20%. 
D)  inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 25%.

Question 19

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

Accepted Answer

rise, exce

Question 20

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Accepted Answer

A)  velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P. 
B)  velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P. 
C)  velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P. 
D)  velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P. 
A)  velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P. 
B)  velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P. 
C)  velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P. 
D)  velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P.

Exam 30: Money Growth and Inflation

The costs a business incurs to change its prices are called .

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

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

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Which of the following is an example of menu costs?

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Which of the following is correct?

When the money market is drawn with the value of money on the vertical axis, the price level decreases if

If inflation is lower than what was expected,

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

As the price level falls, the value of money falls.

If there is inflation, then a firm that has kept its price fixed for some time will have a

When inflation rises, the nominal interest rate

According to the Fisher effect, if inflation rises then the nominal interest rate rises.

Open-market purchases by the Fed make the money supply

In which of the following cases is the after-tax real interest rate highest?

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

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

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In the long run an increase in the money supply causes the price level to . The price level moves in this direction because an increase in the money supply creates in the money market that causes people to spending.