Question 1

Based on the quantity equation,if M = 100,V = 4,and Y = 200,then P =

Accepted Answer

A)  1/2.
B)  2.
C)  8.
D)  None of the above is correct.E) None of the above
F) B) and C)

Question 2

If real output in an economy is 1000 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 of goods is

Accepted Answer

A)  $0.90.
B)  $1.00.
C)  $1.11.
D)  $1.33.E) None of the above
F) C) and D)

Question 3

Which of the following is correct?

Accepted Answer

A)  hyperinflation is a period of extraordinarily high inflation.
B)  deflation is negative inflation, not just a decrease in the inflation rate.
C)  during the 1990s US inflation averaged 2% per year.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 4

Most economists believe that monetary neutrality provides

Accepted Answer

A)  a good description of both the long run and the short run.
B)  a good description of neither the long run nor the short run.
C)  a good description of the short run, but not the long run.
D)  a good description of the long run, but not the short run.E) A) and B)
F) A) and D)

Question 5

Which of the following events in post-World War I Germany likely contributed to the rise of Nazism and World War II?

Accepted Answer

A)  deflation that proved detrimental to farmers
B)  an aversion to inflation by policymakers that kept wages from rising
C)  an unexpected drop in inflation that hurt borrowers
D)  an extraordinarily high rate of inflationE) A) and B)
F) B) and D)

Question 6

Money demand refers to

Accepted Answer

A)  the total quantity of financial assets that people want to hold.
B)  how much income people want to make per year.
C)  how much wealth people want to hold in liquid form.
D)  how much currency the Federal Reserve decides to print.E) A) and D)
F) A) and C)

Question 7

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) A) and D)
F) A) and B)

Question 8

Velocity is

Accepted Answer

A)  Y/(M x P)  and increases if dollars are exchanged less frequently.
B)  Y/(M x P)  and increases if dollars are exchanged more frequently.
C)  (P x Y) /M and increases if dollars are exchanged less frequently.
D)  (P x Y) /M and increases if dollars are exchanged more frequently.E) All of the above
F) C) and D)

Question 9

The cost of changing price tags and price listings is known as

Accepted Answer

A)  inflation-induced tax distortions.
B)  relative-price variability costs.
C)  shoeleather costs.
D)  menu costs.E) A) and B)
F) B) and D)

Question 10

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 11

The classical dichotomy argues that changes in the money supply

Accepted Answer

A)  affect both nominal and real variables.
B)  affect neither nominal nor real variables.
C)  affect nominal variables, but not real variables.
D)  do not affect nominal variables, but do affect real variables.E) B) and C)
F) All of the above

Question 12

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 nominal interest rates.
B)  the inflation rate, but not nominal interest rates.
C)  nominal interest rates, but not the inflation rate.
D)  neither the inflation rate nor nominal interest rates.E) A) and B)
F) None of the above

Question 13

Explain how inflation affects savings.

Accepted Answer

Inflation discourages savings.Income tax...

Question 14

According to the assumptions of quantity theory,if the money supply increases 5% then

Accepted Answer

A)  nominal and real GDP would rise by 5%.
B)  nominal GDP would rise by 5%; real GDP would be unchanged.
C)  nominal GDP would be unchanged; real GDP would rise by 5%.
D)  neither nominal GDP nor real GDP would change.E) A) and B)
F) None of the above

Question 15

Economic variables whose values are measured in goods are called

Accepted Answer

A)  dichotomous variables.
B)  nominal variables.
C)  classical variables.
D)  real variables.E) B) and C)
F) A) and D)

Question 16

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 17

The country of Veridian has a tax system identical to that of the United States.Suppose someone in Veridian bought a parcel of land for 10,000 deera (the local currency) in 1964 when the price index equaled 100.In 2005,the person sold the land for 100,000 deera,and the price index equaled 500.The tax rate on nominal capital gains was 20%.Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2005 prices to find the after-tax real capital gain.

Accepted Answer

A)  $72,000
B)  $62,000
C)  $32,000
D)  $6,400E) B) and D)
F) A) and C)

Question 18

Which of the following statements about U.S.inflation is not correct?

Accepted Answer

A)  Low inflation was viewed as a triumph of President Carter's economic policy.
B)  There were long periods in the nineteenth century during which prices fell.
C)  The U.S.public has viewed inflation of even 7 percent as a major economic problem.
D)  The U.S.inflation rate has varied over time, but international data shows even more variation.E) A) and B)
F) None of the above

Question 19

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 C)

Question 20

For a given real interest rate,a decrease in the inflation rate would

Accepted Answer

A)  decrease the after-tax real interest rate and so decrease saving.
B)  decrease the after-tax real interest rate and so increase saving.
C)  increase the after-tax real interest rate and so decrease saving.
D)  increase the after-tax real interest rate and so increase saving.E) C) and D)
F) B) and D)

Exam 30: Money Growth and Inflation

The source of all four classic hyperinflations was high rates of money growth.

Correct Answer
verified

The cost of changing price tags and price listings is known as

Correct Answer
verified

Velocity is

Correct Answer
verified

Most economists believe that monetary neutrality provides

Correct Answer
verified

If real output in an economy is 1000 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 of goods is

Correct Answer
verified

Explain how inflation affects savings.

Correct Answer
verified
Inflation discourages savings.Income tax...
View Answer

Which of the following events in post-World War I Germany likely contributed to the rise of Nazism and World War II?

Correct Answer
verified

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

Correct Answer
verified

For a given real interest rate,a decrease in the inflation rate would

Correct Answer
verified

Based on the quantity equation,if M = 100,V = 4,and Y = 200,then P =

Correct Answer
verified

The classical dichotomy argues that changes in the money supply

Correct Answer
verified

Economic variables whose values are measured in goods are called

Correct Answer
verified

Which of the following statements about U.S.inflation is not correct?

Correct Answer
verified

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

Correct Answer
verified

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 Answer
verified

Which of the following is correct?

Correct Answer
verified

Correct Answer
verified

According to the assumptions of quantity theory,if the money supply increases 5% then

Correct Answer
verified

Money demand refers to

Correct Answer
verified

A decrease in the money supply creates an excess

Correct Answer
verified

Exam 30: Money Growth and Inflation

The source of all four classic hyperinflations was high rates of money growth.

Correct AnswerverifiedShow Answer

The cost of changing price tags and price listings is known as

Correct AnswerverifiedShow Answer

Velocity is

Correct AnswerverifiedShow Answer

Most economists believe that monetary neutrality provides

Correct AnswerverifiedShow Answer

If real output in an economy is 1000 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 of goods is

Correct AnswerverifiedShow Answer

Explain how inflation affects savings.

Correct AnswerverifiedInflation discourages savings.Income tax...View AnswerShow Answer

Which of the following events in post-World War I Germany likely contributed to the rise of Nazism and World War II?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a given real interest rate,a decrease in the inflation rate would

Correct AnswerverifiedShow Answer

Based on the quantity equation,if M = 100,V = 4,and Y = 200,then P =

Correct AnswerverifiedShow Answer

The classical dichotomy argues that changes in the money supply

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in goods are called

Correct AnswerverifiedShow Answer

Which of the following statements about U.S.inflation is not correct?

Correct AnswerverifiedShow Answer

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

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

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the assumptions of quantity theory,if the money supply increases 5% then

Correct AnswerverifiedShow Answer

Money demand refers to

Correct AnswerverifiedShow Answer

A decrease in the money supply creates an excess

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Inflation discourages savings.Income tax...
View Answer

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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Correct Answer
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Correct Answer
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