Question 1

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) None of the above

Question 2

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Accepted Answer

A)   the quantity of money demanded and the quantity of money supplied
B)   the quantity of money demanded but not the quantity of money supplied
C)   the quantity of money supplied but not the quantity of money demanded
D)   neither the quantity of money supplied nor the quantity of money demandedE) B) and C)
F) A) and C)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Suppose an economy produces only ice cream cones. If the price level rises, the value of currency

Accepted Answer

A)   rises, because one unit of currency buys more ice cream cones.
B)   rises, because one unit of currency buys fewer ice cream cones.
C)   falls, because one unit of currency buys more ice cream cones.
D)   falls, because one unit of currency buys fewer ice cream cones.E) All of the above
F) C) and D)

Question 5

Nominal GDP measures

Accepted Answer

A)   the total quantity of final goods and services produced.
B)   the dollar value of the economy's output of final goods and services.
C)   the total income received from producing final goods and services measured in constant dollars.
D)   the overall level of prices.E) None of the above
F) C) and D)

Question 6

You put money in the bank. The increase in the dollar value of your savings

Accepted Answer

A)   and the change in the number of goods you can buy with your savings are both nominal variables.
B)   and the change in the number of goods you can buy with your savings are both real variables.
C)   is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
D)   is a real variable, but the change in the number of goods you buy with your savings is a nominal variable.E) A) and B)
F) None of the above

Question 7

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 rates of even 7 percent as a major economic problem.
D)   The U.S. inflation rate has varied over time, but international data show even more variation.E) All of the above
F) C) and D)

Question 8

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

Accepted Answer

A)   the inflation rate and growth of real GDP.
B)   the inflation rate but not the growth rate of real GDP.
C)   the growth rate of real GDP, but not the inflation rate.
D)   neither the inflation rate nor the growth rate of real GDP.E) A) and C)
F) All of the above

Question 9

With the value of money on the vertical axis, the money supply curve is

Accepted Answer

A)   upward-sloping.
B)   downward-sloping.
C)   horizontal.
D)   vertical.E) A) and B)
F) All of the above

Question 10

Given a nominal interest rate of 8 percent, in which of the following cases would you earn the highest after-tax real interest rate?

Accepted Answer

A)   Inflation is 5 percent; the tax rate is 40 percent.
B)   Inflation is 4 percent; the tax rate is 30 percent.
C)   Inflation is 3 percent; the tax rate is 45 percent.
D)   Inflation is 2 percent; the tax rate is 50 percent.E) B) and C)
F) A) and D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

There was hyperinflation during the

Accepted Answer

A)   period 1880-1896 in the United States.
B)   1970s in the United States.
C)   early part of the current century in Zimbabwe.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 13

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Accepted Answer

A)   M = 800, V = 16
B)   M = 150, V = 3
C)   M = 400, V = 2
D)   M = 200, V = 2E) A) and B)
F) A) and C)

Question 14

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) None of the above

Question 15

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

Accepted Answer

A)   real GDP
B)   unemployment
C)   nominal interest rates
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 16

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Accepted Answer

A)   Inflation is 3 percent; the tax rate is 15 percent.
B)   Inflation is 2 percent; the tax rate is 40 percent.
C)   Inflation is 1 percent; the tax rate is 50 percent.
D)   The after-tax real interest rate is the same for all of the above.E) C) and D)
F) B) and D)

Question 17

The idea of menu costs suggests that

Accepted Answer

A)   firms alter prices less frequently as inflation increases.
B)   firms alter prices more frequently as inflation increases.
C)   firms always alter prices when costs increase.
D)   firms alter prices as interest rates rise.E) B) and D)
F) A) and C)

Question 18

The price level rises if either

Accepted Answer

A)   money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a rise in the value of money.
B)   money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a fall in the value of money.
C)   money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a rise in the value of money.
D)   money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a fall in the value of money.E) B) and C)
F) B) and D)

Question 19

Relative­price variability is "automatic" when

Accepted Answer

A)   firms change prices only once in a while.
B)   firms change prices often.
C)   people increase the frequency of their trips to the bank.
D)   people decrease the frequency of their trips to the bank.E) A) and D)
F) A) and C)

Question 20

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to in the long run.

Accepted Answer

The answer of Suppose the rate of inflation rate is...

Exam 12: Money Growth and Inflation

Between 1880 and 1886, prices that were

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Suppose an economy produces only ice cream cones. If the price level rises, the value of currency

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Nominal GDP measures

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

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

Correct AnswerverifiedShow Answer

The idea of menu costs suggests that

Correct AnswerverifiedShow Answer

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to in the long run.

Correct AnswerverifiedShow Answer

You put money in the bank. The increase in the dollar value of your savings

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 8 percent, in which of the following cases would you earn the highest after-tax real interest rate?

Correct AnswerverifiedShow Answer

With the value of money on the vertical axis, the money supply curve is

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

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Relative­price variability is "automatic" when

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If P = 4 and Y = 200, then which of the following pairs of values are possible?

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When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

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The price level rises if either

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Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

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Which of the following is correct?

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There was hyperinflation during the

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

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

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Relativeprice variability is "automatic" when

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