Question 1

Most economists believe that monetary neutrality provides

Accepted Answer

A)   a good description of both the long run and the short run.
B)   a good description of neither the long run nor the short run.
C)   a good description of the short run,but not the long run.
D)   a good description of the long run,but not the short run.E) A) and B)
F) A) and C)

Question 2

For a given real interest rate,a decrease in the inflation rate would

Accepted Answer

A)   decrease the after-tax real interest rate and so decrease saving.
B)   decrease the after-tax real interest rate and so increase saving.
C)   increase the after-tax real interest rate and so decrease saving.
D)   increase the after-tax real interest rate and so increase saving.E) A) and B)
F) None of the above

Question 3

Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 2,then A)  when the money market is in equilibrium,one dollar purchases about one-third of a basket of goods and services. B)  when the money market is in equilibrium,one unit of goods and services sells for 33 cents. C)  there is an excess demand for money if the value of money in terms of goods and services is 0.5. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-3.If the relevant money-supply curve is the one labeled MS2,then

Accepted Answer

A)   when the money market is in equilibrium,one dollar purchases about one-third of a basket of goods and services.
B)   when the money market is in equilibrium,one unit of goods and services sells for 33 cents.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.5.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 4

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply shifts the money supply curve to the

Accepted Answer

A)   right,lowering the price level.
B)   right,raising the price level.
C)   left,raising the price level.
D)   left,lowering the price level.E) B) and C)
F) A) and D)

Question 5

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

Question 6

If there is inflation,then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)   high relative price.Relative-price variability rises as the inflation rate rises.
B)   high relative price.Relative-price variability falls as the inflation rate rises.
C)   low relative price.Relative-price variability rises as the inflation rate rises.
D)   low relative price.Relative-price variability falls as the inflation rate rises.E) B) and C)
F) A) and B)

Question 7

The inflation tax

Accepted Answer

A)   is an alternative to income taxes and government borrowing.
B)   taxes most those who hold the most money.
C)   is the revenue created when the government prints money.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A)   is 1.5 times its old value.
B)   is 3 times its old value.
C)   is 6 times its old value.
D)   is the same as its old value.E) A) and B)
F) A) and C)

Question 9

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Accepted Answer

We must suppose that V is rela...

Question 10

According to the Fisher effect,if inflation rises then the nominal interest rate rises.

Accepted Answer

A) True 
 B)False

Question 11

Economic variables whose values are measured in monetary units are called

Accepted Answer

A)   dichotomous variables.
B)   nominal variables.
C)   classical variables.
D)   real variables.E) B) and C)
F) A) and B)

Question 12

If inflation is lower than what was expected,

Accepted Answer

A)   creditors receive a lower real interest rate than they had anticipated.
B)   creditors pay a lower real interest rate than they had anticipated.
C)   debtors receive a higher real interest rate than they had anticipated.
D)   debtors pay a higher real interest rate than they had anticipated.E) A) and C)
F) B) and C)

Question 13

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 wage
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 14

When inflation rises,people will desire to hold

Accepted Answer

A)   less money and will go to the bank less frequently.
B)   less money and will go to the bank more frequently.
C)   more money and will go to the bank less frequently.
D)   more money and will go to the bank more frequently.E) B) and D)
F) B) and C)

Question 15

The source of hyperinflations is primarily

Accepted Answer

A)   lower output growth.
B)   continuing declines in velocity.
C)   increases in money-supply growth.
D)   continuing increases in money demand.E) None of the above
F) A) and B)

Question 16

The nominal interest rate is 4%,the inflation rate is 1% and the tax rate is 20%.Given U.S.tax laws,how is after-tax real return computed?

Accepted Answer

A)   .03(1-.20) 
B)   .04(1 -.20) 
C)   .04(1 - .20) - .01
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 17

If velocity and output were nearly constant,then

Accepted Answer

A)   the inflation rate would be much higher than the money supply growth rate.
B)   the inflation rate would be about the same as the money supply growth rate.
C)   the inflation rate would be much lower than the money supply growth rate.
D)   any of the above would be possible.E) A) and D)
F) B) and C)

Question 18

In order to maintain stable prices,a central bank must

Accepted Answer

A)   maintain low interest rates.
B)   keep unemployment low.
C)   tightly control the money supply.
D)   sell indexed bonds.E) B) and D)
F) A) and C)

Question 19

Assuming the Fisher Effect holds,and given U.S.tax laws,an increase in inflation

Accepted Answer

A)   increases the real interest rate and the after-tax real rate of interest.
B)   increases the real interest rate and the after-tax real rate of interest
C)   does not change the real interest rate but raises the after tax real rate of interest
D)   does not change the real interest rate but reduces the after-tax real rate of interest.E) None of the above
F) C) and D)

Question 20

The price of a Honda Accord

Accepted Answer

A)   and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
B)   and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
C)   is a real variable,and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
D)   is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.E) A) and B)
F) B) and D)

Exam 30: Money Growth and Inflation

If inflation is lower than what was expected,

Correct AnswerverifiedShow Answer

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

Correct AnswerverifiedWe must suppose that V is rela...View AnswerShow Answer

According to the Fisher effect,if inflation rises then the nominal interest rate rises.

Correct AnswerverifiedShow Answer

Assuming the Fisher Effect holds,and given U.S.tax laws,an increase in inflation

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply shifts the money supply curve to the

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The inflation tax

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The source of hyperinflations is primarily

Correct AnswerverifiedShow Answer

If there is inflation,then a firm that has kept its price fixed for some time will have a

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Most economists believe that monetary neutrality provides

Correct AnswerverifiedShow Answer

The price of a Honda Accord

Correct AnswerverifiedShow Answer

Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-3.If the relevant money-supply curve is the one labeled MS2,then

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in monetary units are called

Correct AnswerverifiedShow Answer

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Correct AnswerverifiedShow Answer

The nominal interest rate is 4%,the inflation rate is 1% and the tax rate is 20%.Given U.S.tax laws,how is after-tax real return computed?

Correct AnswerverifiedShow Answer

When inflation rises,people will desire to hold

Correct AnswerverifiedShow Answer

In order to maintain stable prices,a central bank must

Correct AnswerverifiedShow Answer

For a given real interest rate,a decrease in the inflation rate would

Correct AnswerverifiedShow Answer

If velocity and output were nearly constant,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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We must suppose that V is rela...
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Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-3.If the relevant money-supply curve is the one labeled MS₂,then

Correct Answer
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