Question 1

Between 1880 and 1896 the average level of prices in the U.S. economy

Accepted Answer

A)  fell 23 percent. 
B)  fell 4 percent. 
C)  rose 23 percent. 
D)  rose 50 percent.

Question 2

You find that to attract a sufficient number of workers you have to pay them more dollars. Given the price of your output you determine you are paying your workers more in goods than before. Which of the following has risen?

Accepted Answer

A)  The real and nominal value of the wages you pay. 
B)  The real but not the nominal value of wages you pay. 
C)  The nominal but not the real value of the wages you pay. 
D)  Neither the real nor the nominal value of the wages you pay.

Question 3

Inflation can be measured by the

Accepted Answer

A)  change in the consumer price index. 
B)  percentage change in the consumer price index. 
C)  percentage change in the price of a specific commodity. 
D)  change in the price of a specific commodity.

Question 4

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Accepted Answer

The answer of Inflation distorts relative prices. What does this...

Question 5

Inflation can be measured by the

Accepted Answer

A)  change in the consumer price index. Inflation in the U.S. has averaged about 2.5% over the last 80 years. 
B)  change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years. 
C)  percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years. 
D)  percentage change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.

Question 6

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.

Question 7

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 8

Inflation distorts savings when real interest income, rather than nominal interest income, is taxed.

Accepted Answer

A) True 
 B)False

Question 9

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Accepted Answer

A)  The number of dollars you receive increases and the purchasing power of the dollars you receive increases. 
B)  The number of dollars you receive increases and the purchasing power of the dollars you receive decreases. 
C)  The number of dollars you receive decreases and the purchasing power of the dollars you receive increases. 
D)  The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.

Question 10

The inflation rate is measured as the percentage change in a price index.

Accepted Answer

A) True 
 B)False

Question 11

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Accepted Answer

A)  the price level will rise. 
B)  the value of money will rise. 
C)  money demand will shift leftward. 
D)  money demand will shift rightward.

Question 12

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

Accepted Answer

The answer of In recent years Venezuela and Ukraine have...

Question 13

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

Accepted Answer

A)  Friedman Effect. 
B)  Hume Effect. 
C)  Fisher Effect. 
D)  the inflation tax.

Question 14

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Accepted Answer

The answer of A decrease in the value of money...

Question 15

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.

Question 16

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply

Accepted Answer

A)  increases the price level and increases the value of money. 
B)  increases the price level and decreases the value of money. 
C)  decreases the price level and increases the value of money. 
D)  decreases the price level and decreases the value of money.

Question 17

According to the classical dichotomy, which of the following is affected by monetary factors?

Accepted Answer

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

Question 18

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 19

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

Accepted Answer

A)  135 
B)  132 
C)  125 
D)  121

Question 20

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Accepted Answer

The answer of Money neutrality states that a change in...

Exam 17: Money Growth and Inflation

Between 1880 and 1896 the average level of prices in the U.S. economy

You find that to attract a sufficient number of workers you have to pay them more dollars. Given the price of your output you determine you are paying your workers more in goods than before. Which of the following has risen?

Inflation can be measured by the

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Inflation can be measured by the

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

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

Inflation distorts savings when real interest income, rather than nominal interest income, is taxed.

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

The inflation rate is measured as the percentage change in a price index.

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

In recent years Venezuela and Ukraine have had much higher nominal interest rates than the United States while Japan has had lower nominal interest rates. What would you predict is true about money growth in these other countries? Why?

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

A decrease in the value of money the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

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

According to the classical dichotomy, which of the following is affected by monetary factors?

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is $11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be

Money neutrality states that a change in the money supply affects _ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _.