Question 1

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 2

Figure 30-1  
-Refer to Figure 30-1. If the current money supply is MS1, then

Accepted Answer

A)  equilibrium exists when the value of money is 2. 
B)  equilibrium exists when the equilibrium is at point D. 
C)  equilibrium exists when the value of money is 1. 
D)  there is excess demand if the value of money is 2. 
A)  equilibrium exists when the value of money is 2. 
B)  equilibrium exists when the equilibrium is at point D. 
C)  equilibrium exists when the value of money is 1. 
D)  there is excess demand if the value of money is 2.

Question 3

The Fisher effect is crucial for understanding changes over time in

Accepted Answer

A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the unemployment rate. 
A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the inflation rate. 
D)  the unemployment rate.

Question 4

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Accepted Answer

A) True 
 B)False

Question 5

The country of Lessidinia has a tax system identical to that of the United States. Suppose someone in Lessidinia bought a parcel of land for 20,000 foci (the local currency) in 1960 when the price index equaled 100. In 2002, the person sold the land for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20 percent. Compute the taxes on the nominal gain and the change in the real value of the land in terms of 2002 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)  -60 percent 
B)  -30 percent 
C)  30 percent 
D)  60 percent 
A)  -60 percent 
B)  -30 percent 
C)  30 percent 
D)  60 percent

Question 6

The consumer price index increases from 200 to 208. What is the inflation rate?

Accepted Answer

The answer of The consumer price index increases from 200...

Question 7

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

Accepted Answer

A)  The dollar amount you pay is a nominal value. The number of goods you give up is a real value. 
B)  The dollar amount you pay is a real value. The number of goods you give up is a nominal value. 
C)  Both the dollar amount you pay and the goods you give up are nominal values. 
D)  Both the dollar amount you pay and the goods you give up are real values. 
A)  The dollar amount you pay is a nominal value. The number of goods you give up is a real value. 
B)  The dollar amount you pay is a real value. The number of goods you give up is a nominal value. 
C)  Both the dollar amount you pay and the goods you give up are nominal values. 
D)  Both the dollar amount you pay and the goods you give up are real values.

Question 8

Other things the same, a decrease in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls. 
A)  the rate at which money changes hands falls, so the price level rises. 
B)  the rate at which money changes hands falls, so the price level falls. 
C)  the rate at which money changes hands rises, so the price level rises. 
D)  the rate at which money changes hands rises, so the price level falls.

Question 9

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 interpreted as the inflation rate. 
C)  the supply of money influences the value of P, but the demand for money does not. 
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 interpreted as the inflation rate. 
C)  the supply of money influences the value of P, but the demand for money does not. 
D)  All of the above are correct.

Question 10

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

Accepted Answer

A)  real GDP. 
B)  real wages. 
C)  real interest rates. 
D)  All of the above are correct. 
A)  real GDP. 
B)  real wages. 
C)  real interest rates. 
D)  All of the above are correct.

Question 11

The theory that most economists rely on to explain inflation is called the .

Accepted Answer

The answer of The theory that most economists rely on...

Question 12

According to the principle of monetary neutrality, a decrease in the money supply will not change

Accepted Answer

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

Question 13

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Accepted Answer

A)  the price level must have risen 
B)  the price level must have fallen. 
C)  the price level rises if money supply shifts farther than money demand. 
D)  the price level falls if money supply shifts farther than money demand. 
A)  the price level must have risen 
B)  the price level must have fallen. 
C)  the price level rises if money supply shifts farther than money demand. 
D)  the price level falls if money supply shifts farther than money demand.

Question 14

Higher inflation

Accepted Answer

A)  causes firms to change prices less frequently and makes relative prices less variable. 
B)  causes firms to change prices less frequently and makes relative prices more variable. 
C)  causes firms to change prices more frequently and makes relative prices less variable. 
D)  causes firms to change prices more frequently and makes relative prices more variable. 
A)  causes firms to change prices less frequently and makes relative prices less variable. 
B)  causes firms to change prices less frequently and makes relative prices more variable. 
C)  causes firms to change prices more frequently and makes relative prices less variable. 
D)  causes firms to change prices more frequently and makes relative prices more variable.

Question 15

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

Accepted Answer

A)  a nominal interest rate of 5 percent and an inflation rate of 4 percent. 
B)  a nominal interest rate of 4 percent and an inflation rate of 3 percent. 
C)  a nominal interest rate of 8 percent and an inflation rate of 1 percent. 
D)  a nominal interest rate of 14 percent and an inflation rate of 2 percent. 
A)  a nominal interest rate of 5 percent and an inflation rate of 4 percent. 
B)  a nominal interest rate of 4 percent and an inflation rate of 3 percent. 
C)  a nominal interest rate of 8 percent and an inflation rate of 1 percent. 
D)  a nominal interest rate of 14 percent and an inflation rate of 2 percent.

Question 16

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

Accepted Answer

A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases. 
A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases.

Question 17

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

Accepted Answer

A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases. 
A)  increases, so the quantity of money demanded increases. 
B)  increases, so the quantity of money demanded decreases. 
C)  decreases, so the quantity of money demanded decreases. 
D)  decreases, so the quantity of money demanded increases.

Question 18

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

The Fisher effect

Accepted Answer

A)  says the government can generate revenue by printing money. 
B)  says there is a one for one adjustment of the nominal interest rate to the inflation rate. 
C)  explains how higher money supply growth leads to higher inflation. 
D)  explains how prices adjust to obtain equilibrium in the money market. 
A)  says the government can generate revenue by printing money. 
B)  says there is a one for one adjustment of the nominal interest rate to the inflation rate. 
C)  explains how higher money supply growth leads to higher inflation. 
D)  explains how prices adjust to obtain equilibrium in the money market.

Exam 30: Money Growth and Inflation

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Figure 30-1 -Refer to Figure 30-1. If the current money supply is MS1, then

The Fisher effect is crucial for understanding changes over time in

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

The consumer price index increases from 200 to 208. What is the inflation rate?

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

Other things the same, a decrease in velocity means that

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

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

The theory that most economists rely on to explain inflation is called the .

According to the principle of monetary neutrality, a decrease in the money supply will not change

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Higher inflation

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

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

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

Inflation is costly only if it is unanticipated.

The source of all four classic hyperinflations was high rates of money growth.

The Fisher effect

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

An increase in the price level means that a dollar buys goods and services so the value of a dollar .