Question 1

Relative-price variability is "automatic" when

Accepted Answer

A)   firms change prices only once in a while.
B)   firms change prices often.
C)   people increase the frequency of their trips to the bank.
D)   people decrease the frequency of their trips to the bank.E) All of the above
F) C) and D)

Question 2

If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

Accepted Answer

A) True 
 B)False

Question 3

In the long run,an increase in the growth rate of the money supply leads to an increase in the real interest rate,but no change in the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 4

Why did farmers in the late 1800s dislike deflation?

Accepted Answer

Most had large nominal debts.T...

Question 5

The supply curve of money is vertical because the quantity of money supplied increases

Accepted Answer

A)   when the value of money increases.
B)   when the value of money decreases.
C)   only if people desire to hold more money.
D)   only if the central bank increases the money supply.E) All of the above
F) A) and B)

Question 6

Nominal GDP measures

Accepted Answer

A)   the total quantity of final goods and services produced.
B)   the dollar value of the economy's output of final goods and services.
C)   the total income received from producing final goods and services measured in constant dollars.
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 7

If the price level increased from 120 to 126,then what was the inflation rate?

Accepted Answer

A)   3 percent
B)   5 percent
C)   6 percent
D)   None of the above is correct.E) C) and D)
F) All of the above

Question 8

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

Accepted Answer

Relative prices are the value of one goo...

Question 9

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

Question 10

Under the assumptions of the Fisher effect and monetary neutrality,if the money supply growth rate falls,then

Accepted Answer

A)   both the nominal and the real interest rate fall.
B)   neither the nominal nor the real interest rate fall.
C)   the nominal interest rate falls,but the real interest rate does not.
D)   the real interest rate falls,but the nominal interest rate does not.E) A) and D)
F) None of the above

Question 11

As the price level rises,the value of money

Accepted Answer

A)   falls,and people desire to hold less of it.
B)   falls,and people desire to hold more of it.
C)   rises,and people desire to hold less of it.
D)   rises,and people desire to hold more of it.E) B) and C)
F) A) and C)

Question 12

If the inflation rate falls,people are likely to

Accepted Answer

A)   change prices more frequently and go to the bank more frequently.
B)   change prices more frequently and go to the bank less frequently.
C)   change prices less frequently and go to the bank less frequently.
D)   change prices less frequently and go the bank more frequently.E) B) and D)
F) C) and D)

Question 13

U.S.prices rose at an average annual rate of about 4 percent over the last 70 years.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A)   a real interest rate of 2.5 percent and an inflation rate of 2 percent
B)   a real interest rate of 4 percent and an inflation rate of 11 percent
C)   a real interest rate of 6 percent and an inflation rate of 1 percent
D)   a real interest rate of 5.5 percent and an inflation rate of 3 percentE) C) and D)
F) B) and D)

Question 16

If real output in an economy is 1,000 goods per year,the money supply is $300,and each dollar is spent an average of 3 times per year,then according to the quantity equation,the average price level is

Accepted Answer

A)   $0.90.
B)   $1.00.
C)   $1.11.
D)   $1.33.E) All of the above
F) C) and D)

Question 17

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1,then the equilibrium price level is A)  0.5 and the equilibrium value of money is 2. B)  2 and the equilibrium value of money is 0.5. C)  0.5 and the equilibrium value of money cannot be determined from the graph. D)  2 and the equilibrium value of money cannot be determined from the graph." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-3.If the relevant money-supply curve is the one labeled MS1,then the equilibrium price level is

Accepted Answer

A)   0.5 and the equilibrium value of money is 2.
B)   2 and the equilibrium value of money is 0.5.
C)   0.5 and the equilibrium value of money cannot be determined from the graph.
D)   2 and the equilibrium value of money cannot be determined from the graph.E) A) and B)
F) B) and C)

Question 18

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

Accepted Answer

A)   the real wage
B)   the real interest rate
C)   the nominal wage
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 19

The inflation tax refers to

Accepted Answer

A)   the revenue a government creates by printing money.
B)   higher inflation which requires more frequent price changes.
C)   the idea that,other things the same,an increase in the tax rate raises the inflation rate.
D)   taxes being indexed for inflation.E) C) and D)
F) A) and B)

Question 20

In which of the following cases was the inflation rate 10 percent over the last year?

Accepted Answer

A)   One year ago the price index had a value of 110 and now it has a value of 120.
B)   One year ago the price index had a value of 120 and now it has a value of 132.
C)   One year ago the price index had a value of 126 and now it has a value of 140.
D)   One year ago the price index had a value of 145 and now it has a value of 163.E) C) and D)
F) A) and D)

Exam 30: Money Growth and Inflation

As the price level rises,the value of money

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The supply curve of money is vertical because the quantity of money supplied increases

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

Correct AnswerverifiedRelative prices are the value of one goo...View AnswerShow Answer

If the inflation rate falls,people are likely to

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The inflation tax refers to

Correct AnswerverifiedShow Answer

In the long run,an increase in the growth rate of the money supply leads to an increase in the real interest rate,but no change in the nominal interest rate.

Correct AnswerverifiedShow Answer

Under the assumptions of the Fisher effect and monetary neutrality,if the money supply growth rate falls,then

Correct AnswerverifiedShow Answer

In which of the following cases was the inflation rate 10 percent over the last year?

Correct AnswerverifiedShow Answer

U.S.prices rose at an average annual rate of about 4 percent over the last 70 years.

Correct AnswerverifiedShow Answer

Why did farmers in the late 1800s dislike deflation?

Correct AnswerverifiedMost had large nominal debts.T...View AnswerShow Answer

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.If the relevant money-supply curve is the one labeled MS1,then the equilibrium price level is

Correct AnswerverifiedShow Answer

Nominal GDP measures

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price level increased from 120 to 126,then what was the inflation rate?

Correct AnswerverifiedShow Answer

If real output in an economy is 1,000 goods per year,the money supply is $300,and each dollar is spent an average of 3 times per year,then according to the quantity equation,the average price level is

Correct AnswerverifiedShow Answer

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

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

Relative-price variability is "automatic" when

Correct AnswerverifiedShow Answer

If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Relative prices are the value of one goo...
View Answer

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Most had large nominal debts.T...
View Answer

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.If the relevant money-supply curve is the one labeled MS₁,then the equilibrium price level is

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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Inflation has raised the general price l...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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