Question 1

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

Accepted Answer

A)   the quantity of money demanded and the quantity of money supplied
B)   the quantity of money demanded but not the quantity of money supplied
C)   the quantity of money supplied but not the quantity of money demanded
D)   neither the quantity of money supplied nor the quantity of money demandedE) None of the above
F) A) and B)

Question 2

The primary reason people hold money is

Accepted Answer

A)   to keep wealth in a less liquid form.
B)   to use it as a medium of exchange.
C)   to use it for investment.
D)   to earn interest.E) All of the above
F) A) and C)

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.E) B) and C)
F) A) and D)

Question 4

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest...

Question 5

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Accepted Answer

A)   $4,000.
B)   $2,250.
C)   $250.
D)   $36,000.E) A) and C)
F) B) and D)

Question 6

The term hyperinflation refers to

Accepted Answer

A)   the spread of inflation from one country to others.
B)   a decrease in the inflation rate.
C)   a period of very high inflation.
D)   inflation accompanied by a recession.E) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)   the price level
B)   real GDP
C)   nominal interest rates
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 8

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Accepted Answer

A) True 
 B)False

Question 9

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. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)   -43 percent
B)   -57 percent
C)   57 percent
D)   75 percentE) B) and C)
F) B) and D)

Question 10

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Accepted Answer

A)   8.
B)   0.5.
C)   2.
D)   3.E) A) and B)
F) A) and C)

Question 11

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Accepted Answer

A)   $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
B)   $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
C)   15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
D)   15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.E) A) and D)
F) A) and C)

Question 12

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

Accepted Answer

A)   excess demand for money, so the price level will rise.
B)   excess demand for money, so the price level will fall.
C)   excess supply of money, so the price level will rise.
D)   excess supply of money, so the price level will fall.E) A) and B)
F) A) and C)

Question 13

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.E) C) and D)
F) A) and D)

Question 14

In which case is velocity the highest?

Accepted Answer

A)   the price level equals 4, the money supply equals 5,000, and output equals 20,000.
B)   the price level equals 4, the money supply equals 20,000 and output equals 5,000.
C)   the price level equals 2, the money supply equals 5,000, and output equals 20,000.
D)   the price level equals 2, the money supply equals 20,000 and output equals 5,000.E) A) and D)
F) B) and C)

Question 15

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Accepted Answer

A)   The nominal interest rate was 13.5 percent and the inflation rate was 7.5 percent.
B)   The nominal interest rate was 13.5 percent and the inflation rate was 1.5 percent.
C)   The nominal interest rate was 6 percent and the inflation rate was -1.5 percent.
D)   The nominal interest rate was 6 percent and the inflation rate was 7.5 percent.E) A) and B)
F) A) and C)

Question 16

When inflation rises, people

Accepted Answer

A)   make less frequent trips to the bank and firms make less frequent price changes.
B)   make less frequent trips to the bank while firms make more frequent price changes.
C)   make more frequent trips to the bank while firms make less frequent price changes.
D)   make more frequent trips to the bank and firms make more frequent price changes.E) None of the above
F) B) and C)

Question 17

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her

Accepted Answer

A)   nominal income and real income increased.
B)   nominal income increased, but their real income decreased.
C)   nominal income and real income decreased.
D)   nominal income decreased, but their real income increased.E) None of the above
F) All of the above

Question 18

Which of the following is not correct?

Accepted Answer

A)   The inflation rate is measured as the percentage change in a price index.
B)   For the last 40 or so years, U.S. inflation hasn't shown much variation from its average rate of about 2 percent.
C)   During the 19th century there were long periods of falling prices in the U.S.
D)   Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes.E) C) and D)
F) A) and B)

Question 19

Market economies rely on which of the following to allocate scarce resources?

Accepted Answer

A)   government
B)   consumers
C)   relative prices
D)   real interest ratesE) B) and C)
F) A) and C)

Question 20

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

Which of the following is not correct?

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

Correct Answer
verified

Market economies rely on which of the following to allocate scarce resources?

Correct Answer
verified

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Correct Answer
verified

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Correct Answer
verified

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct Answer
verified
Inflation and nominal interest...
View Answer

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Correct Answer
verified

In the long run, money demand and money supply determine

Correct Answer
verified

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Correct Answer
verified

The term hyperinflation refers to

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

When inflation rises, people

Correct Answer
verified

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct Answer
verified

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

Correct Answer
verified

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Correct Answer
verified

The primary reason people hold money is

Correct Answer
verified

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her

Correct Answer
verified

Inflation can be measured by the

Correct Answer
verified

In which case is velocity the highest?

Correct Answer
verified

Exam 30: Money Growth and Inflation

Which of the following is not correct?

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

Correct AnswerverifiedShow Answer

Market economies rely on which of the following to allocate scarce resources?

Correct AnswerverifiedShow Answer

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Correct AnswerverifiedShow Answer

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct AnswerverifiedInflation and nominal interest...View AnswerShow Answer

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Correct AnswerverifiedShow Answer

In the long run, money demand and money supply determine

Correct AnswerverifiedShow Answer

Based on the quantity equation, if M = 150, V = 4, and Y = 300, then P =

Correct AnswerverifiedShow Answer

The term hyperinflation refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When inflation rises, people

Correct AnswerverifiedShow Answer

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Correct AnswerverifiedShow Answer

The primary reason people hold money is

Correct AnswerverifiedShow Answer

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

In which case is velocity the highest?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Inflation and nominal interest...
View Answer

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verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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