Question 1

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same,an increase in velocity means that

Accepted Answer

A)   transactions per dollar increase so the price level rises.
B)   transactions per dollar increase so the price level falls.
C)   transactions per dollar decrease so the price level rises.
D)   transactions per dollar decrease so the price level falls.E) A) and B)
F) A) and C)

Question 3

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 4

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 5

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) None of the above
F) All of the above

Question 6

Which of the following is correct?

Accepted Answer

A)   If the Fed purchases bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
B)   If the Fed sells bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve.
C)   If the Fed purchases bonds,then the money supply curve shifts right.An increase in the price level shifts the money supply curve right.
D)   If the Fed sells bonds,then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right.E) B) and C)
F) All of the above

Question 7

Higher inflation

Accepted Answer

A)   causes firms to change prices less frequently and makes relative prices less variable.
B)   causes firms to change prices less frequently and makes relative prices more variable.
C)   causes firms to change prices more frequently and makes relative prices less variable.
D)   causes firms to change prices more frequently and makes relative prices more variable.E) B) and C)
F) C) and D)

Question 8

Figure 22-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1; also suppose the economy's real GDP is 30,000 for the year.If the money market is in equilibrium,then how many times per year is the typical dollar bill used to pay for a newly produced good or service? A)  4 B)  6 C)  8 D)  12" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-2.Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 30,000 for the year.If the money market is in equilibrium,then how many times per year is the typical dollar bill used to pay for a newly produced good or service?

Accepted Answer

A)   4
B)   6
C)   8
D)   12E) C) and D)
F) B) and C)

Question 9

When inflation rises,people tend to go to the bank

Accepted Answer

A)   more often,giving rise to menu costs.
B)   more often,giving rise to shoeleather costs.
C)   less often,giving rise to redistribution costs.
D)   less often,thereby lessening the severity of the inflation tax.E) C) and D)
F) A) and D)

Question 10

If inflation is higher than expected,then borrowers make nominal interest payments that are less than they expected.

Accepted Answer

A) True 
 B)False

Question 11

Monetary neutrality means that a change in the money supply

Accepted Answer

A)   does not change real variables.Most economists think this is a good description of the economy in the short run and in the long run.
B)   does not change real variables.Most economists think this is a good description of the economy in the long run but not the short run.
C)   does not change nominal variables.Most economists think this is a good description of the economy in the short-run and the long run.
D)   does not change nominal variables.Most economists think this is a good description of the economy in the long run but not the short run.E) A) and B)
F) A) and C)

Question 12

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

Accepted Answer

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

Question 13

The classical dichotomy refers to the idea that the supply of money

Accepted Answer

A)   is irrelevant for understanding the determinants of nominal and real variables.
B)   determines nominal variables,but not real variables.
C)   determines real variables,but not nominal variables.
D)   is a determinant of both real and nominal variables.E) B) and C)
F) A) and C)

Question 14

Between 1880 and 1886,prices that were

Accepted Answer

A)   lower than expected transferred wealth from creditors to debtors.
B)   lower than expected transferred wealth from debtors to creditors.
C)   higher than expected transferred wealth from creditors to debtors.
D)   higher than expected transferred wealth from debtors to creditors.E) B) and D)
F) A) and D)

Question 15

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Accepted Answer

A)   60 percent.
B)   80 percent.
C)   220 percent.
D)   24,000 percent.E) A) and B)
F) None of the above

Question 16

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Accepted Answer

A)   The nominal interest rate was 11 percent and the inflation rate was 5 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 5 percent.
C)   The nominal interest rate was 5 percent and the inflation rate was -1 percent.
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 17

Wealth is redistributed from creditors to debtors when inflation is

Accepted Answer

A)   high,whether it is expected or not.
B)   low,whether it is expected or not.
C)   unexpectedly high.
D)   unexpectedly low.E) A) and D)
F) A) and B)

Question 18

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Accepted Answer

A)   shifts rightward,causing the value of money measured in terms of goods and services to rise.
B)   shifts rightward,causing the value of money measured in terms of goods and services to fall.
C)   shifts leftward,causing the value of money measured in terms of goods and services to rise.
D)   shifts leftward,causing the value of money measured in terms of goods and services to fall.E) B) and C)
F) A) and D)

Question 19

Katarina puts money into an account.One year later she sees that she has 6 percent more dollars and that her money will buy 2 percent more goods.

Accepted Answer

A)   The nominal interest rate was 8 percent and the inflation rate was 6 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 4 percent.
C)   The nominal interest rate was 4 percent and the inflation rate was 2 percent.
D)   None of the above is correct.E) All of the above
F) None of the above

Question 20

Figure 22-1 1 to MS2, A)  the demand for goods and services decreases. B)  the economy's ability to produce goods and services increases. C)  the equilibrium price level decreases. D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-1.When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)   the demand for goods and services decreases.
B)   the economy's ability to produce goods and services increases.
C)   the equilibrium price level decreases.
D)   None of the above is correct.E) A) and D)
F) B) and C)

Exam 22: Money Growth and Inflation

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Correct Answer
verified

Wealth is redistributed from creditors to debtors when inflation is

Correct Answer
verified

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

Correct Answer
verified

If inflation is higher than expected,then borrowers make nominal interest payments that are less than they expected.

Correct Answer
verified

Katarina puts money into an account.One year later she sees that she has 6 percent more dollars and that her money will buy 2 percent more goods.

Correct Answer
verified

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Correct Answer
verified

Monetary neutrality means that a change in the money supply

Correct Answer
verified

Correct Answer
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When inflation rises,people tend to go to the bank

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Correct Answer
verified

Between 1880 and 1886,prices that were

Correct Answer
verified

Which of the following is correct?

Correct Answer
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Figure 22-1 -Refer to Figure 22-1.When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
verified

Higher inflation

Correct Answer
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Other things the same,an increase in velocity means that

Correct Answer
verified

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Correct Answer
verified

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Correct Answer
verified

A decrease in the money supply creates an excess

Correct Answer
verified

The classical dichotomy refers to the idea that the supply of money

Correct Answer
verified

Inflation is costly only if it is unanticipated.

Correct Answer
verified

Exam 22: Money Growth and Inflation

The irrelevance of monetary changes for real variables is called monetary neutrality.Most economists accept monetary neutrality as a good description of the economy in the long run,but not the short run.

Correct AnswerverifiedShow Answer

Wealth is redistributed from creditors to debtors when inflation is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If inflation is higher than expected,then borrowers make nominal interest payments that are less than they expected.

Correct AnswerverifiedShow Answer

Katarina puts money into an account.One year later she sees that she has 6 percent more dollars and that her money will buy 2 percent more goods.

Correct AnswerverifiedShow Answer

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Correct AnswerverifiedShow Answer

Monetary neutrality means that a change in the money supply

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When inflation rises,people tend to go to the bank

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Correct AnswerverifiedShow Answer

Between 1880 and 1886,prices that were

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Figure 22-1 -Refer to Figure 22-1.When the money supply curve shifts from MS1 to MS2,

Correct AnswerverifiedShow Answer

Higher inflation

Correct AnswerverifiedShow Answer

Other things the same,an increase in velocity means that

Correct AnswerverifiedShow Answer

In early 2008,the central bank of Zimbabwe announced the inflation rate in that country had reached

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis,the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Correct AnswerverifiedShow Answer

A decrease in the money supply creates an excess

Correct AnswerverifiedShow Answer

The classical dichotomy refers to the idea that the supply of money

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

Correct AnswerverifiedShow Answer

Correct Answer
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Figure 22-1 -Refer to Figure 22-1.When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
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