Question 1

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

Accepted Answer

A)   money demand shifts right and decreases if money supply shifts right.
B)   money demand shifts right and decreases if money supply shifts left.
C)   money demand shifts left and decreases if money supply shifts right.
D)   money demand shifts left and decreases if money supply shifts left.E) A) and B)
F) B) and C)

Question 2

Inflation can be measured by the

Accepted Answer

A)   change in the consumer price index.
B)   percentage change in the consumer price index.
C)   percentage change in the price of a specific commodity.
D)   change in the price of a specific commodity.E) B) and C)
F) None of the above

Question 3

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Accepted Answer

A)   decrease,which encourages savings.
B)   decrease,which discourages savings.
C)   increase,which encourages savings.
D)   increase,which discourages savings.E) All of the above
F) A) and B)

Question 6

Over the last 70 years,the average annual U.S.inflation rate was about

Accepted Answer

A)   2 percent,implying that prices have increased 10-fold.
B)   4 percent,implying that prices have increased 10-fold.
C)   2 percent,implying that prices have increased 16-fold.
D)   4 percent,implying that prices increased about 16-fold.E) A) and B)
F) All of the above

Question 7

The shoeleather cost of inflation refers to

Accepted Answer

A)   the redistributional effects of unexpected inflation.
B)   the time spent searching for low prices when inflation rises.
C)   the waste of resources used to maintain lower money holdings.
D)   the increased cost to the government of printing more money.E) B) and D)
F) B) and C)

Question 8

Suppose that when the money supply changes,real output and velocity do not change.Then a 2 percent increase in the money supply

Accepted Answer

A)   decreases the price level by 2 percent.
B)   decreases the price level by less than 2 percent.
C)   increases the price level by less than 2 percent.
D)   increases the price level by 2 percent.E) A) and B)
F) All of the above

Question 9

Figure 30-2.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 30-2.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) A) and C)
F) A) and B)

Question 10

An increase in money demand would create a surplus of money at the original value of money.

Accepted Answer

A) True 
 B)False

Question 11

Define each of the symbols and explain the meaning of M  
V = P  
Y.

Accepted Answer

M is the quantity of money,V is the velo...

Question 12

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Accepted Answer

A)   excess demand for money which causes the price level to rise.
B)   excess demand for money which causes the price level to fall.
C)   excess supply of money which causes the price level to rise.
D)   excess supply of money which causes the price level to fall.E) None of the above
F) A) and C)

Question 13

If money is neutral and velocity is stable,an increase in the money supply creates a proportional increase in

Accepted Answer

A)   real output only.
B)   nominal output only.
C)   the price level only.
D)   both the price level and nominal output.E) B) and C)
F) A) and C)

Question 14

Which of the following is not implied by the quantity equation?

Accepted Answer

A)   If velocity is stable,an increase in the money supply creates a proportional increase in nominal output.
B)   If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in the price level.
C)   With constant money supply and output,an increase in velocity creates an increase in the price level.
D)   With constant money supply and velocity,an increase in output creates a proportional increase in the price level.E) A) and B)
F) None of the above

Question 15

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1,then the equilibrium value of money is A)  0.5 and the equilibrium price level is 2. B)  2 and the equilibrium price level is 0.5. C)  0.5 and the equilibrium price level cannot be determined from the graph. D)  2 and the equilibrium price level cannot be determined from the graph." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then the equilibrium value of money is

Accepted Answer

A)   0.5 and the equilibrium price level is 2.
B)   2 and the equilibrium price level is 0.5.
C)   0.5 and the equilibrium price level cannot be determined from the graph.
D)   2 and the equilibrium price level cannot be determined from the graph.E) All of the above
F) C) and D)

Question 16

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) None of the above
F) B) and C)

Question 17

Menu costs refers to

Accepted Answer

A)   resources used by people to maintain lower money holdings when inflation is high.
B)   resources used to price shop during times of high inflation.
C)   the distortion in incentives created by inflation when taxes do not adjust for inflation.
D)   the cost of more frequent price changes induced by higher inflation.E) B) and C)
F) A) and D)

Question 18

If the economy unexpectedly went from inflation to deflation,

Accepted Answer

A)   both debtors and creditors would have reduced real wealth.
B)   both debtors and creditors would have increased real wealth.
C)   debtors would gain at the expense of creditors.
D)   creditors would gain at the expense of debtors.E) C) and D)
F) B) and C)

Question 19

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Accepted Answer

A)   11.5 percent
B)   7.5 percent
C)   4.5 percent
D)   2.5 percentE) B) and C)
F) A) and B)

Question 20

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Accepted Answer

A)   6 times its old value.
B)   3 times its old value.
C)   1.5 times its old value.
D)   0.75 times its old valueE) None of the above
F) B) and C)

Exam 30: Money Growth and Inflation

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Correct Answer
verified

If the economy unexpectedly went from inflation to deflation,

Correct Answer
verified

If money is neutral and velocity is stable,an increase in the money supply creates a proportional increase in

Correct Answer
verified

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Correct Answer
verified

Between 1880 and 1886,prices that were

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Correct Answer
verified

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

Correct Answer
verified

Menu costs refers to

Correct Answer
verified

Correct Answer
verified

Inflation can be measured by the

Correct Answer
verified

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct Answer
verified

Over the last 70 years,the average annual U.S.inflation rate was about

Correct Answer
verified

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD₁,then the equilibrium value of money is

Correct Answer
verified

Define each of the symbols and explain the meaning of M V = P Y.

Correct Answer
verified
M is the quantity of money,V is the velo...
View Answer

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Correct Answer
verified

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

Correct Answer
verified

An increase in money demand would create a surplus of money at the original value of money.

Correct Answer
verified

Which of the following is not implied by the quantity equation?

Correct Answer
verified

The shoeleather cost of inflation refers to

Correct Answer
verified

Suppose that when the money supply changes,real output and velocity do not change.Then a 2 percent increase in the money supply

Correct Answer
verified

Exam 30: Money Growth and Inflation

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Correct AnswerverifiedShow Answer

If the economy unexpectedly went from inflation to deflation,

Correct AnswerverifiedShow Answer

If money is neutral and velocity is stable,an increase in the money supply creates a proportional increase in

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent,then what is the real interest rate?

Correct AnswerverifiedShow Answer

Between 1880 and 1886,prices that were

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Menu costs refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct AnswerverifiedShow Answer

Over the last 70 years,the average annual U.S.inflation rate was about

Correct AnswerverifiedShow Answer

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then the equilibrium value of money is

Correct AnswerverifiedShow Answer

Define each of the symbols and explain the meaning of M V = P Y.

Correct AnswerverifiedM is the quantity of money,V is the velo...View AnswerShow Answer

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in money demand would create a surplus of money at the original value of money.

Correct AnswerverifiedShow Answer

Which of the following is not implied by the quantity equation?

Correct AnswerverifiedShow Answer

The shoeleather cost of inflation refers to

Correct AnswerverifiedShow Answer

Suppose that when the money supply changes,real output and velocity do not change.Then a 2 percent increase in the money supply

Correct AnswerverifiedShow 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

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD₁,then the equilibrium value of money is

Correct Answer
verified

Correct Answer
verified
M is the quantity of money,V is the velo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified