Question 1

People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as

Accepted Answer

A)  inflation-induced tax distortion.
B)  relative-price-variability cost.
C)  shoeleather cost.
D)  menu cost.E) None of the above
F) All of the above

Question 2

If the nominal interest rate is 15 percent and the inflation rate is 5 percent, then what is the real interest rate?

Accepted Answer

A)  10 percent
B)  20 percent
C)  3 percent
D)  5 percentE) None of the above
F) A) and B)

Question 3

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 2. At the end of 2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? A) -43 percent B) -57 percent C) 57 percent D) 75 percent" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)  -43 percent
B)  -57 percent
C)  57 percent
D)  75 percentE) A) and B)
F) A) and C)

Question 4

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? A) -33 percent B) 17 percent C) 50 percent D) 67 percent" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-3. At the end of 2009 the relevant money-supply curve was the one labeled MS1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)  -33 percent
B)  17 percent
C)  50 percent
D)  67 percentE) A) and D)
F) A) and B)

Question 5

If the price level increased from 120 to 130, then what was the inflation rate?

Accepted Answer

A)  1.1 percent.
B)  7.7 percent.
C)  10.0 percent.
D)  8.3 percent.E) A) and B)
F) B) and D)

Question 6

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Accepted Answer

A) True 
 B)False

Question 7

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Accepted Answer

A)  The number of dollars you receive increases and the purchasing power of the dollars you receive increases.
B)  The number of dollars you receive increases and the purchasing power of the dollars you receive decreases.
C)  The number of dollars you receive decreases and the purchasing power of the dollars you receive increases.
D)  The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.E) A) and C)
F) B) and D)

Question 8

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

Accepted Answer

A)  the real wage.
B)  the real interest rate.
C)  the nominal interest rate.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 9

Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your

Accepted Answer

A)  nominal wage is higher.
B)  nominal wage is lower.
C)  real wage is higher.
D)  real wage is lower.E) A) and D)
F) B) and C)

Question 10

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 B)

Question 11

The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?

Accepted Answer

nominal va...

Question 12

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) A) and C)
F) B) and C)

Question 13

Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)  the equilibrium value of money decreases.
B)  the equilibrium price level decreases.
C)  the supply of money has decreased.
D)  the demand for goods and services will decrease.E) B) and C)
F) A) and D)

Question 14

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Accepted Answer

A)  higher than she had expected, and the real value of the loan is higher than she had expected.
B)  higher than she had expected, and the real value of the loan is lower than she had expected.
C)  lower than she had expected, and the real value of the loan is higher than she had expected.
D)  lower then she had expected, and the real value of the loan is lower than she had expected.E) A) and D)
F) A) and C)

Question 15

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _____ and real GDP to _____.

Accepted Answer

double, re...

Question 16

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Accepted Answer

M x V = P ...

Question 17

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if:
a.the Fed increases the money supply.
b.people decide to demand less money at each value of money.

Accepted Answer

a.The Fed increases the money supply. ...

Question 18

If the Fed increases the money supply, then 1/P

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) All of the above
F) A) and D)

Question 19

Which of the following is an example of menu costs?

Accepted Answer

A)  deciding on new prices
B)  printing new price lists
C)  advertising new prices
D)  All of the above are examples of menu costs.E) None of the above
F) A) and B)

Question 20

The quantity theory of money

Accepted Answer

A)  is a fairly recent addition to economic theory.
B)  can explain both moderate inflation and hyperinflation.
C)  argues that inflation is caused by too little money in the economy.
D)  All of the above are correct.E) A) and C)
F) A) and B)

Exam 30: Money Growth and Inflation

If the nominal interest rate is 15 percent and the inflation rate is 5 percent, then what is the real interest rate?

Correct Answer
verified

Correct Answer
verified

Refer to Figure 30-1. When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
verified

If the Fed increases the money supply, then 1/P

Correct Answer
verified

The quantity theory of money

Correct Answer
verified

The quantity equation is expressed as _. The rate at which money changes hands is known as _.

Correct Answer
verified
M x V = P ...
View Answer

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

Correct Answer
verified

Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your

Correct Answer
verified

People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as

Correct Answer
verified

Which of the following is an example of menu costs?

Correct Answer
verified

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Correct Answer
verified

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Correct Answer
verified

Correct Answer
verified

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Correct Answer
verified

The price level rises if either

Correct Answer
verified

There was hyperinflation during the

Correct Answer
verified

If the price level increased from 120 to 130, then what was the inflation rate?

Correct Answer
verified

The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?

Correct Answer
verified
nominal va...
View Answer

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

Correct Answer
verified
a.The Fed increases the money supply. ...
View Answer

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _ and real GDP to _.

Correct Answer
verified
double, re...
View Answer

Exam 30: Money Growth and Inflation

If the nominal interest rate is 15 percent and the inflation rate is 5 percent, then what is the real interest rate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,

Correct AnswerverifiedShow Answer

If the Fed increases the money supply, then 1/P

Correct AnswerverifiedShow Answer

The quantity theory of money

Correct AnswerverifiedShow Answer

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Correct AnswerverifiedM x V = P ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your

Correct AnswerverifiedShow Answer

People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as

Correct AnswerverifiedShow Answer

Which of the following is an example of menu costs?

Correct AnswerverifiedShow Answer

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Correct AnswerverifiedShow Answer

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Correct AnswerverifiedShow Answer

The price level rises if either

Correct AnswerverifiedShow Answer

There was hyperinflation during the

Correct AnswerverifiedShow Answer

If the price level increased from 120 to 130, then what was the inflation rate?

Correct AnswerverifiedShow Answer

The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?

Correct Answerverifiednominal va...View AnswerShow Answer

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

Correct Answerverified a.The Fed increases the money supply. ...View AnswerShow Answer

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _____ and real GDP to _____.

Correct Answerverifieddouble, re...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Refer to Figure 30-1. When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The quantity equation is expressed as _. The rate at which money changes hands is known as _.

Correct Answer
verified
M x V = P ...
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

Correct Answer
verified
nominal va...
View Answer

Correct Answer
verified
a.The Fed increases the money supply. ...
View Answer

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _ and real GDP to _.

Correct Answer
verified
double, re...
View Answer