Question 1

Relative-price variability

Accepted Answer

A)   rises with inflation, leading to an improved allocation of resources.
B)   rises with inflation, leading to a misallocation of resources.
C)   falls with inflation, leading to an improved allocation of resources.
D)   falls with inflation, leading to a misallocation of resources.E) A) and D)
F) All of the above

Question 2

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Accepted Answer

The answer of In the early 1920s U.S. consumer prices...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Open-market purchases by the Fed make the money supply

Accepted Answer

A)   increase, which makes the value of money increase.
B)   increase, which makes the value of money decrease.
C)   decrease, which makes the value of money decrease.
D)   decrease, which makes the value of money increase.E) None of the above
F) A) and C)

Question 5

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Accepted Answer

A)   4 percent
B)   6 percent
C)   8 percent
D)   10 percentE) B) and C)
F) All of the above

Question 6

Open-market purchases by the Fed

Accepted Answer

A)   make the price level and value of money fall.
B)   make the price level rise, and make the value of money fall.
C)   make the price level and make the value of money rise.
D)   make the price level fall, and make the value of money rise.E) All of the above
F) None of the above

Question 7

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 8

In which case below does a person's purchasing power from saving increase the most?

Accepted Answer

A)   the nominal interest rate = 10% and inflation = 8%
B)   the nominal interest rate = 9% and inflation = 6%
C)   the nominal interest rate = 8% and inflation = 4%
D)   the nominal interest rate = 7% and inflation = 2%E) B) and D)
F) C) and D)

Question 9

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Accepted Answer

A)   is 1.5 times its old value.
B)   is 3 times its old value.
C)   is 6 times its old value.
D)   is the same as its old value.E) A) and D)
F) All of the above

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)   either a rise in output or a rise in velocity.
B)   either a rise in output or a fall in velocity.
C)   either a fall in output or a rise in velocity.
D)   either a fall in output or a fall in velocity.E) B) and C)
F) B) and D)

Question 12

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 13

If the price level last year was 180 and this year it is 176, then

Accepted Answer

A)   there was inflation of 2.3 percent.
B)   there was inflation of 4.0 percent.
C)   there was deflation of 2.2 percent.
D)   there was deflation of 4.0 percent.E) None of the above
F) C) and D)

Question 14

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Accepted Answer

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

Question 15

Governments may prefer an inflation tax to some other type 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) None of the above
F) B) and C)

Question 16

If the number of dollars needed to buy a representative basket of goods falls, the price level

Accepted Answer

A)   falls, so the value of money falls.
B)   falls, so the value of money rises.
C)   rises, so the value of money falls.
D)   rises, so the value of money rises.E) B) and D)
F) B) and C)

Question 17

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Accepted Answer

A)   People who held money would feel poorer.
B)   Prices would rise.
C)   People who had lent money at a fixed interest rate would feel poorer.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 19

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the

Accepted Answer

A)   right, lowering the price level.
B)   right, raising the price level.
C)   left, raising the price level.
D)   left, lowering the price level.E) A) and B)
F) A) and C)

Question 20

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Accepted Answer

The nominal interest...

Exam 17: Money Growth and Inflation

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

Correct AnswerverifiedShow Answer

If the number of dollars needed to buy a representative basket of goods falls, the price level

Correct AnswerverifiedShow Answer

In which case below does a person's purchasing power from saving increase the most?

Correct AnswerverifiedShow Answer

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Correct AnswerverifiedShow Answer

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Correct AnswerverifiedThe nominal interest...View AnswerShow Answer

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

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

Open-market purchases by the Fed

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Correct AnswerverifiedShow Answer

Relative-price variability

Correct AnswerverifiedShow Answer

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed make the money supply

Correct AnswerverifiedShow Answer

Suppose the money supply tripled, but at the same time velocity doubled and real GDP was unchanged. According to the quantity equation the price level

Correct AnswerverifiedShow Answer

If the price level last year was 180 and this year it is 176, then

Correct AnswerverifiedShow Answer

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The nominal interest...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified