Question 1

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) None of the above
F) A) and D)

Question 2

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 C)

Question 3

If P denotes the price of goods and services measured in terms of money, then

Accepted Answer

A)   1/P represents the value of money measured in terms of goods and services.
B)   P can be interpreted as the inflation rate.
C)   the supply of money influences the value of P, but the demand for money does not.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 4

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same, a decrease 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) C) and D)
F) B) and C)

Question 6

The theory that most economists rely on to explain inflation is called the .

Accepted Answer

The answer of The theory that most economists rely on...

Question 7

The country of Lessidinia has a tax system identical to that of the United States. Suppose someone in Lessidinia bought a parcel of land for 20,000 foci (the local currency)  in 1960 when the price index equaled 100. In 2002, the person sold the land for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20 percent. Compute the taxes on the nominal gain and the change in the real value of the land in terms of 2002 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)   -60 percent
B)   -30 percent
C)   30 percent
D)   60 percentE) All of the above
F) C) and D)

Question 8

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

Accepted Answer

A)   a nominal interest rate of 5 percent and an inflation rate of 4 percent.
B)   a nominal interest rate of 4 percent and an inflation rate of 3 percent.
C)   a nominal interest rate of 8 percent and an inflation rate of 1 percent.
D)   a nominal interest rate of 14 percent and an inflation rate of 2 percent.E) C) and D)
F) All of the above

Question 9

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 10

Figure 30-1 
-Refer to Figure 30-1. If the current money supply is MS1, then

Accepted Answer

A)   equilibrium exists when the value of money is 2.
B)   equilibrium exists when the equilibrium is at point D.
C)   equilibrium exists when the value of money is 1.
D)   there is excess demand if the value of money is 2.E) B) and D)
F) A) and B)

Question 11

When the money market is drawn with the value of money on the vertical axis, as the price level decreases, the value of money

Accepted Answer

A)   increases, so the quantity of money demanded increases.
B)   increases, so the quantity of money demanded decreases.
C)   decreases, so the quantity of money demanded decreases.
D)   decreases, so the quantity of money demanded increases.E) A) and D)
F) A) and C)

Question 12

The Fisher effect

Accepted Answer

A)   says the government can generate revenue by printing money.
B)   says there is a one for one adjustment of the nominal interest rate to the inflation rate.
C)   explains how higher money supply growth leads to higher inflation.
D)   explains how prices adjust to obtain equilibrium in the money market.E) A) and D)
F) A) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

According to the principle of monetary neutrality, a decrease in the money supply will not change

Accepted Answer

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

Question 15

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 16

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

Accepted Answer

A)   increases, so the quantity of money demanded increases.
B)   increases, so the quantity of money demanded decreases.
C)   decreases, so the quantity of money demanded decreases.
D)   decreases, so the quantity of money demanded increases.E) B) and D)
F) A) and D)

Question 17

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Accepted Answer

A)   the price level must have risen
B)   the price level must have fallen.
C)   the price level rises if money supply shifts farther than money demand.
D)   the price level falls if money supply shifts farther than money demand.E) B) and C)
F) All of the above

Question 18

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

Accepted Answer

A)   The dollar amount you pay is a nominal value. The number of goods you give up is a real value.
B)   The dollar amount you pay is a real value. The number of goods you give up is a nominal value.
C)   Both the dollar amount you pay and the goods you give up are nominal values.
D)   Both the dollar amount you pay and the goods you give up are real values.E) All of the above
F) A) and B)

Question 19

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Accepted Answer

A)   real GDP.
B)   real wages.
C)   real interest rates.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 20

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Exam 30: Money Growth and Inflation

Higher inflation

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

According to the principle of monetary neutrality, a decrease in the money supply will not change

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, as the price level decreases, the value of money

Correct Answer
verified

The Fisher effect

Correct Answer
verified

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Correct Answer
verified

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Correct Answer
verified

Correct Answer
verified

The Fisher effect is crucial for understanding changes over time in

Correct Answer
verified

Other things the same, a decrease in velocity means that

Correct Answer
verified

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

Correct Answer
verified

The theory that most economists rely on to explain inflation is called the .

Correct Answer
verified

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

Correct Answer
verified

Figure 30-1 -Refer to Figure 30-1. If the current money supply is MS1, then

Correct Answer
verified

If P denotes the price of goods and services measured in terms of money, then

Correct Answer
verified

Inflation is costly only if it is unanticipated.

Correct Answer
verified

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Correct Answer
verified

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified

Exam 30: Money Growth and Inflation

Higher inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the principle of monetary neutrality, a decrease in the money supply will not change

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, as the price level decreases, the value of money

Correct AnswerverifiedShow Answer

The Fisher effect

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is not influenced by monetary factors?

Correct AnswerverifiedShow Answer

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if money supply and money demand both shift to the right

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Fisher effect is crucial for understanding changes over time in

Correct AnswerverifiedShow Answer

Other things the same, a decrease in velocity means that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The theory that most economists rely on to explain inflation is called the .

Correct AnswerverifiedShow Answer

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

Correct AnswerverifiedShow Answer

Figure 30-1 -Refer to Figure 30-1. If the current money supply is MS1, then

Correct AnswerverifiedShow Answer

If P denotes the price of goods and services measured in terms of money, then

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

Correct AnswerverifiedShow Answer

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Correct AnswerverifiedShow Answer

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Correct AnswerverifiedShow Answer

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verified

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified