Question 1

Which of the following concerning the history of U.S.inflation is not correct?

Accepted Answer

A)  Prices rose at an average annual rate of about 4 percent over the last 70 years.
B)  There was about a 16-fold increase in the price level over the last 70 years.
C)  Inflation in the 1970s was below the average over the last 70 years.
D)  During it's history the United States has experienced periods of deflation.E) B) and D)
F) A) and B)

Question 2

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

Accepted Answer

Inflation has raised the general price l...

Question 3

Deflation

Accepted Answer

A)  increases the ability to pay debts and raises the value of money.
B)  increases the ability to pay debts and lowers the value of money.
C)  reduces the ability to pay debts and raises the value of money.
D)  reduces the ability to pay debts and lowers the value of money.E) B) and C)
F) A) and D)

Question 4

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

Accepted Answer

A)  demanded increases.
B)  demanded decreases.
C)  supplied increases.
D)  supplied decreases.E) A) and D)
F) None of the above

Question 5

Use the figure below for the following questions.
Figure 30-1
 
-Refer to Figure 30-1.If the money supply is MS₂ and the value of money is 2,there is excess

Accepted Answer

A)  demand equal to the distance between A and C.
B)  demand equal to the distance between A and B.
C)  supply equal to the distance between A and C.
D)  supply equal to the distance between A and B.E) A) and B)
F) A) and D)

Question 6

Last year,Tealandia produced 50,000 bags of green tea.This was Tealandia's only production.Each bag sold at 4 units each of Tealandia's currency-the Leaf.Tealandia's money supply was 10,000.What was the velocity of money in Tealandia?

Accepted Answer

A)  20
B)  5
C)  1/20
D)  1/5E) B) and D)
F) B) and C)

Question 7

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela...

Question 8

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

Accepted Answer

A)  the inflation rate and growth of real GDP.
B)  the inflation rate but not the growth rate of real GDP.
C)  the growth rate of real GDP, but not the inflation rate.
D)  neither the inflation rate nor the growth rate of real GDP.E) B) and D)
F) B) and C)

Question 9

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Accepted Answer

A)  The nominal interest rate was 8 percent and the inflation rate was 6 percent.
B)  The nominal interest rate was 6 percent and the inflation rate was 4 percent.
C)  The nominal interest rate was 4 percent and the inflation rate was 2 percent.
D)  None of the above is correct.E) A) and D)
F) B) and C)

Question 10

Given a nominal interest rate of 6 percent,in which case would you earn the lowest after-tax real rate of interest?

Accepted Answer

A)  Inflation is 4 percent; the tax rate is 25 percent.
B)  Inflation is 3 percent; the tax rate is 20 percent.
C)  Inflation is 2 percent; the tax rate is 15 percent.
D)  The after-tax real interest rate is the same for all of the above.E) A) and D)
F) C) and D)

Question 11

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) A) and B)
F) A) and C)

Question 12

High and unexpected inflation has a greater cost

Accepted Answer

A)  for those who borrow than those who save.
B)  for those who hold a little money than for those who hold a lot of money.
C)  for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage.
D)  for savers in high income tax brackets than for savers in low income tax brackets.E) B) and C)
F) C) and D)

Question 13

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

Question 14

You buy stock and its price rises just as much as the price level.Before taxes you made

Accepted Answer

A)  a nominal and real gain, and you pay taxes on the nominal gain.
B)  a nominal and real gain, but you pay taxes only on the real gain.
C)  a nominal gain, but no real gain, yet you pay taxes on the nominal gain.
D)  a nominal gain, but no real gain, so you pay no taxes on the nominal gain.E) A) and B)
F) A) and C)

Question 15

Velocity is computed as

Accepted Answer

A)  (P × Y) /M.
B)  (P × M) /Y.
C)  (Y × M) /P.
D)  (Y × M) /V.E) A) and B)
F) A) and C)

Question 16

Define each of the symbols and explain the meaning of M × V = P × Y.

Accepted Answer

M is the quantity of money,V is the velo...

Question 17

When the money market is drawn with the value of money on the vertical axis,the value of money increases 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.E) B) and C)
F) A) and C)

Question 18

When the money market is drawn with the value of money on the vertical axis,the price level increases 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.E) B) and D)
F) A) and B)

Question 19

In the 1970s in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.The central banks might have done this by

Accepted Answer

A)  selling bonds on the open market, which would have raised the value of money.
B)  purchasing bonds on the open market, which would have raised the value of money.
C)  selling bonds on the open market, which would have raised the value of money
D)  purchasing bonds on the open market, which would have lowered the value of moneyE) None of the above
F) C) and D)

Question 20

Governments may prefer an inflation tax to some other kind of tax because the inflation tax

Accepted Answer

A)  is easier to impose.
B)  reduces inflation.
C)  falls mainly on high-income individuals.
D)  reduces the real cost of government expenditure.E) A) and B)
F) A) and C)

Exam 30: Money Growth and Inflation

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

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Given a nominal interest rate of 6 percent,in which case would you earn the lowest after-tax real rate of interest?

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Which of the following concerning the history of U.S.inflation is not correct?

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

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Velocity is computed as

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

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Deflation

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

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High and unexpected inflation has a greater cost

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Last year,Tealandia produced 50,000 bags of green tea.This was Tealandia's only production.Each bag sold at 4 units each of Tealandia's currency-the Leaf.Tealandia's money supply was 10,000.What was the velocity of money in Tealandia?

Correct AnswerverifiedShow Answer

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

Correct AnswerverifiedShow Answer

Governments may prefer an inflation tax to some other kind of tax because the inflation tax

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

Correct AnswerverifiedInflation has raised the general price l...View AnswerShow Answer

You buy stock and its price rises just as much as the price level.Before taxes you made

Correct AnswerverifiedShow Answer

In the 1970s in response to recessions caused by an increase in the price of oil,the central banks in many countries increased the money supply.The central banks might have done this by

Correct AnswerverifiedShow Answer

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Correct AnswerverifiedWe must suppose that V is rela...View AnswerShow Answer

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.If the money supply is MS₂ and the value of money is 2,there is excess

Correct AnswerverifiedShow Answer

Define each of the symbols and explain the meaning of M × V = P × Y.

Correct AnswerverifiedM is the quantity of money,V is the velo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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Inflation has raised the general price l...
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Correct Answer
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We must suppose that V is rela...
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Correct Answer
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Correct Answer
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M is the quantity of money,V is the velo...
View Answer

Correct Answer
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