Question 1

If M = 9,000, P = 6, and Y = 1,500, what is velocity?

Accepted Answer

A)  0.167.
B)  1.
C)  4.
D)  36.E) None of the above
F) All of the above

Question 2

If the CPI rises, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)  increases, and so the value of money rises.
B)  increases, and so the value of money falls.
C)  decreases, and so the value of money rises.
D)  decreases, and so the value of money fallsE) None of the above
F) A) and B)

Question 3

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Accepted Answer

A)  both a nominal gain and a real gain, and you paid taxes on the nominal gain.
B)  both a nominal gain and a real gain, and you paid taxes only on the real gain.
C)  a nominal gain, but no real gain, and you paid taxes on the nominal gain.
D)  a nominal gain, but no real gain, and you paid no taxes on the transaction.E) C) and D)
F) All of the above

Question 4

If the real interest rate is 5% and the inflation rate is 3%, then the nominal interest rate is 8%.

Accepted Answer

A) True 
 B)False

Question 5

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

Accepted Answer

A)  your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.
B)  your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased.
C)  your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased.
D)  your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.E) B) and D)
F) C) and D)

Question 6

Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 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)  The nominal interest rate was 6 percent and the inflation rate was 1 percent.E) A) and C)
F) B) and C)

Question 7

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Accepted Answer

An increase in inflation reduc...

Question 8

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Accepted Answer

A)  4 percent
B)  6 percent
C)  8 percent
D)  10 percentE) All of the above
F) B) and C)

Question 9

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

Accepted Answer

A)  40 percent.
B)  33.3 percent.
C)  25 percent.
D)  50 percent.E) A) and B)
F) B) and D)

Question 10

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Accepted Answer

The nominal interest...

Question 11

The hyperinflation in Zimbabwe ended in April 2009 when the central bank purchased government bonds in open-market operations.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

Accepted Answer

A) True 
 B)False

Question 13

​The primary cause of inflation is

Accepted Answer

A)  ​growth in the quantity of money.
B)  ​variability in relative prices.
C)  inter-bank lending.
D)  reduced velocity of money.E) A) and B)
F) C) and D)

Question 14

Which of the following is not correct?

Accepted Answer

A)  The inflation rate is measured as the percentage change in a price index.
B)  For the last 40 or so years, U.S. inflation hasn't shown much variation from its average rate of about 2 percent.
C)  During the 19th century there were long periods of falling prices in the U.S.
D)  Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes.E) All of the above
F) None of the above

Question 15

Your grandfather tells you that his annual income increased at an average rate of eight percent over his lifetime. He complains, however, that the average inflation rate of three percent reduced his ability to buy all the things he could have purchased if inflation had been zero. You respectfully tell your grandfather that he is committing the _____, because his annual income would have increased at an average rate of only five percent if inflation had been zero.

Accepted Answer

The answer of Your grandfather tells you that his annual...

Question 16

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 regarded as the "overall price level."
C)  an increase in the value of money is associated with a decrease in P.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 17

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Accepted Answer

A)  8 percent
B)  15 percent
C)  2 percent
D)  1.7 percentE) C) and D)
F) B) and C)

Question 18

In the U.S., from the early 1980s through the early 1990s,

Accepted Answer

A)  both inflation and nominal interest rates rose.
B)  both inflation and nominal interest rates fell.
C)  the inflation rate fell and the nominal interest rate rose.
D)  the inflation rate rose and the nominal interest rate fell.E) None of the above
F) All of the above

Question 19

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Correct Answer
verified
An increase in inflation reduc...
View Answer

The primary cause of inflation is

Correct Answer
verified

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

Correct Answer
verified

In the U.S., from the early 1980s through the early 1990s,

Correct Answer
verified

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Correct Answer
verified
The nominal interest...
View Answer

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

Correct Answer
verified

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

Correct Answer
verified

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Correct Answer
verified

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

Correct Answer
verified

If the real interest rate is 5% and the inflation rate is 3%, then the nominal interest rate is 8%.

Correct Answer
verified

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Correct Answer
verified

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Correct Answer
verified

If the CPI rises, the number of dollars needed to buy a representative basket of goods

Correct Answer
verified

If M = 9,000, P = 6, and Y = 1,500, what is velocity?

Correct Answer
verified

The hyperinflation in Zimbabwe ended in April 2009 when the central bank purchased government bonds in open-market operations.

Correct Answer
verified

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Correct Answer
verified

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

Correct Answer
verified

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

Correct Answer
verified

Exam 30: Money Growth and Inflation

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Correct AnswerverifiedAn increase in inflation reduc...View AnswerShow Answer

​The primary cause of inflation is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the U.S., from the early 1980s through the early 1990s,

Correct AnswerverifiedShow Answer

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Correct AnswerverifiedThe nominal interest...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

Correct AnswerverifiedShow Answer

If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the real interest rate is 5% and the inflation rate is 3%, then the nominal interest rate is 8%.

Correct AnswerverifiedShow Answer

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

Correct AnswerverifiedShow Answer

The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?

Correct AnswerverifiedShow Answer

If the CPI rises, the number of dollars needed to buy a representative basket of goods

Correct AnswerverifiedShow Answer

If M = 9,000, P = 6, and Y = 1,500, what is velocity?

Correct AnswerverifiedShow Answer

The hyperinflation in Zimbabwe ended in April 2009 when the central bank purchased government bonds in open-market operations.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

U.S. prices rose at an average annual rate of about 3.6 percent over the last 80 years.

Correct AnswerverifiedShow Answer

Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28 percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2 percent.

Correct AnswerverifiedShow Answer

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

Correct AnswerverifiedShow Answer

Correct Answer
verified
An increase in inflation reduc...
View Answer

The primary cause of inflation is

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
The nominal interest...
View Answer

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