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The quantity theory of money implies that if output and velocity are constant,then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

A) True
B) False

Correct Answer

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A person received 4% nominal interest.The inflation rate was -2% and the tax rate was 25%.This person received an after-tax real interest rate of 5%.

A) True
B) False

Correct Answer

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The United States has never had deflation.

A) True
B) False

Correct Answer

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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.

A) True
B) False

Correct Answer

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Even though monetary policy is neutral in the short run,it may have profound real effects in the long run.

A) True
B) False

Correct Answer

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When the value of money is on the vertical axis,the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

A) True
B) False

Correct Answer

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

A) True
B) False

Correct Answer

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The quantity equation is M x V = P x Y.

A) True
B) False

Correct Answer

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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.

A) True
B) False

Correct Answer

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If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

A) True
B) False

Correct Answer

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When the Fed increases the money supply and creates inflation,it erodes the real value of the unit of account and makes it more difficult for investors to sort successful from unsuccessful firms.

A) True
B) False

Correct Answer

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For a given level of money and real GDP,an increase in velocity would lead to an increase in the price level.

A) True
B) False

Correct Answer

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In United States history there were long periods when most prices fell.

A) True
B) False

Correct Answer

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In the presence of inflation in the U.S. ,accountants incorrectly measure firms' earnings but the tax code correctly measures real incomes.

A) True
B) False

Correct Answer

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The money demand curve shifts to the left when the Fed buys government bonds.

A) True
B) False

Correct Answer

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Unexpected and large deflation is desirable,according to the Friedman rule.

A) True
B) False

Correct Answer

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The hyperinflation in Zimbabwe ended in April 2009 when the central bank purchased government bonds in open-market operations.

A) True
B) False

Correct Answer

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U.S.prices rose at an average annual rate of about 3.6 percent over the last 80 years.

A) True
B) False

Correct Answer

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Suppose the nominal interest rate is 10 percent,the tax rate on interest income is 28 percent,and the inflation rate is 6 percent.Then the after-tax real interest rate is -3.2 percent.

A) True
B) False

Correct Answer

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Real GDP measures output of final goods and services in physical units.

A) True
B) False

Correct Answer

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