Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Other things the same, an increase in velocity means that

Accepted Answer

A)   the rate at which money changes hands falls, so the price level rises.
B)   the rate at which money changes hands falls, so the price level falls.
C)   the rate at which money changes hands rises, so the price level rises.
D)   the rate at which money changes hands rises, so the price level falls.E) A) and D)
F) A) and C)

Question 3

Inflation is problematic if

Accepted Answer

A)   it is less than the percentage increase in nominal income.
B)   it is less than the nominal return on saving.
C)   it equals the growth rate of real GDP in the long run.
D)   it distorts relative prices, causing a misallocation of resources.E) A) and B)
F) None of the above

Question 4

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 5

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Accepted Answer

He was expecting it ...

Question 6

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Accepted Answer

A)   both a nominal gain and a real gain, and you paid taxes on the nominal gain.
B)   both a nominal gain and a real gain, and you paid taxes only on the real gain.
C)   a nominal gain and a real loss, and you paid taxes on the nominal gain.
D)   a nominal gain and a real loss, and you paid no taxes on the transaction.E) A) and B)
F) B) and D)

Question 7

In the last part of the 1800's

Accepted Answer

A)   deflation made it harder for farmers to pay off their debt.
B)   deflation made it easier for farmers to pay off their debt.
C)   inflation made it harder for farmers to pay off their debt.
D)   inflation made it easier for farmers to pay off their debt.E) A) and C)
F) None of the above

Question 8

The consumer price index increases from 200 to 208. What is the inflation rate?

Accepted Answer

The answer of The consumer price index increases from 200...

Question 9

What are menu costs and why does high inflation increase menu costs?

Accepted Answer

Menu costs are the costs of ch...

Question 10

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) None of the above
F) B) and C)

Question 11

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Accepted Answer

M x V = P ...

Question 12

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Accepted Answer

A)   5.25 percent
B)   5 percent
C)   2.3 percent
D)   2 percentE) B) and C)
F) B) and D)

Question 13

The price of a Honda Accord

Accepted Answer

A)   and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B)   and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C)   is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
D)   is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.E) All of the above
F) C) and D)

Question 14

As the price level falls, the value of money falls.

Accepted Answer

A) True 
 B)False

Question 15

A decrease in the money supply creates an excess

Accepted Answer

A)   supply of money that is eliminated by rising prices.
B)   supply of money that is eliminated by falling prices.
C)   demand for money that is eliminated by rising prices.
D)   demand for money that is eliminated by falling prices.E) A) and D)
F) A) and B)

Question 16

Suppose ice cream cones costs $3. Molly holds $60. What is the real value of the money she holds?

Accepted Answer

A)   $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold more dollars.
B)   $60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold fewer dollars.
C)   20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold more dollars.
D)   20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she needs to hold fewer dollars.E) B) and C)
F) None of the above

Question 17

Figure 30-1 
-Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)   the equilibrium value of money decreases.
B)   the equilibrium price level decreases.
C)   the supply of money has decreased.
D)   the demand for goods and services will decrease.E) C) and D)
F) A) and C)

Question 18

Which movie is an allegory about late 19th century monetary policy?

Accepted Answer

A)   The Wizard of Oz
B)   Mary Poppins
C)   It's a Wonderful Life
D)   Trading PlacesE) B) and D)
F) A) and B)

Question 19

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Accepted Answer

A)   2.4 percent.
B)   3.5 percent.
C)   8.5 percent.
D)   15 percent.E) B) and D)
F) A) and D)

Question 20

The Fisher effect is crucial for understanding changes over time in

Accepted Answer

A)   the nominal interest rate.
B)   the real interest rate.
C)   the inflation rate.
D)   the unemployment rate.E) A) and B)
F) B) and D)

Exam 22: Money Growth and Inflation

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 quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Correct AnswerverifiedM x V = P ...View AnswerShow Answer

Other things the same, an increase in velocity means that

Correct AnswerverifiedShow Answer

In the last part of the 1800's

Correct AnswerverifiedShow Answer

A decrease in the money supply creates an excess

Correct AnswerverifiedShow Answer

The consumer price index increases from 200 to 208. What is the inflation rate?

Correct AnswerverifiedShow Answer

Figure 30-1 -Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

Correct AnswerverifiedShow Answer

What are menu costs and why does high inflation increase menu costs?

Correct AnswerverifiedMenu costs are the costs of ch...View AnswerShow Answer

Which movie is an allegory about late 19th century monetary policy?

Correct AnswerverifiedShow Answer

The price of a Honda Accord

Correct AnswerverifiedShow Answer

Suppose ice cream cones costs $3. Molly holds $60. What is the real value of the money she holds?

Correct AnswerverifiedShow Answer

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Correct AnswerverifiedHe was expecting it ...View AnswerShow Answer

The nominal interest rate is 3.5 percent and the inflation rate is 1.5 percent. What is the real interest rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Correct AnswerverifiedShow Answer

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Correct AnswerverifiedShow Answer

Inflation is problematic if

Correct AnswerverifiedShow Answer

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Correct AnswerverifiedShow Answer

As the price level falls, the value of money falls.

Correct AnswerverifiedShow Answer

The Fisher effect is crucial for understanding changes over time in

Correct AnswerverifiedShow Answer

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The quantity equation is expressed as _. The rate at which money changes hands is known as _.

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M x V = P ...
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Menu costs are the costs of ch...
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He was expecting it ...
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