Question 1

If velocity = 3.5,the quantity of money = 15,000,and the price level = 1.2,then the real value of output is

Accepted Answer

A)   3,571.43.
B)   4,285.71.
C)   5,142.86.
D)   43,750.00.E) A) and C)
F) A) and D)

Question 2

Figure 17-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1 to MS2? A)  an increase in the value of money B)  a decrease in the price level C)  an open-market purchase of bonds by the Federal Reserve D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-3.Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

Accepted Answer

A)   an increase in the value of money
B)   a decrease in the price level
C)   an open-market purchase of bonds by the Federal Reserve
D)   None of the above is correct.E) None of the above
F) All of the above

Question 3

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 B)
F) C) and D)

Question 4

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) C) and D)

Question 5

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

Question 6

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Accepted Answer

A)   shifts rightward,causing the value of money measured in terms of goods and services to rise.
B)   shifts rightward,causing the value of money measured in terms of goods and services to fall.
C)   shifts leftward,causing the value of money measured in terms of goods and services to rise.
D)   shifts leftward,causing the value of money measured in terms of goods and services to fall.E) A) and B)
F) A) and C)

Question 7

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)   3.4 percent
B)   1.6 percent
C)   1.0 percent
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 8

Monetary neutrality implies that an increase in the quantity of money will

Accepted Answer

A)   increase employment.
B)   increase the price level.
C)   increase the incentive to save.
D)   not increase any of the above.E) All of the above
F) A) and B)

Question 9

The velocity of money is

Accepted Answer

A)   the rate at which the Fed puts money into the economy.
B)   the same thing as the long-term growth rate of the money supply.
C)   the money supply divided by nominal GDP.
D)   the average number of times per year a dollar is spent.E) B) and D)
F) A) and B)

Question 10

Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

Accepted Answer

A) True 
 B)False

Question 11

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Accepted Answer

A) True 
 B)False

Question 12

Other things the same,an increase 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) B) and D)
F) All of the above

Question 13

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A)   nominal interest rates.
B)   real interest rates.
C)   the price level.
D)   the money supply.E) A) and B)
F) C) and D)

Question 14

Wealth is redistributed from debtors to creditors when inflation is

Accepted Answer

A)   high,whether it is expected or not.
B)   low,whether it is expected or not.
C)   unexpectedly high.
D)   unexpectedly low.E) A) and C)
F) A) and B)

Question 15

Figure 17-2.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 velocity of money is 3.If the money market is in equilibrium,then the economy's real GDP amounts to A)  5,000. B)  7,500. C)  10,000. D)  15,000." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-2.Suppose the relevant money-demand curve is the one labeled MD1;also suppose the velocity of money is 3.If the money market is in equilibrium,then the economy's real GDP amounts to

Accepted Answer

A)   5,000.
B)   7,500.
C)   10,000.
D)   15,000.E) C) and D)
F) A) and C)

Question 16

The supply of money increases when

Accepted Answer

A)   the value of money increases.
B)   the interest rate increases.
C)   the Fed makes open-market purchases.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 17

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80.In 2011 tuition was $12,000 and the price index was 320.Which of the following is correct.

Accepted Answer

A)   Nominal and real tuition were both higher in 1975.
B)   Nominal and real tuition were both higher in 2011.
C)   Nominal tuition was higher in 1975,real tuition was higher in 2011.
D)   Nominal tuition was higher in 2011,real tuition was higher in 1975.E) B) and D)
F) B) and C)

Question 18

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Accepted Answer

A)   the inflation rate and the nominal interest rate by the same number of percentage points.
B)   nominal interest rates but by less than the percentage point increase in the inflation rate.
C)   the inflation rate but not the nominal interest.
D)   neither the inflation rate nor the nominal interest rate.E) A) and B)
F) B) and D)

Question 19

The country of Robinya has a tax system identical to that of the United States.Suppose someone in Robinya bought a parcel of land for 10,000 deera (the local currency) in 1970 when the price index equaled 100.In 2010,the person sold the land for 100,000 deera,and the price index equaled 500.The tax rate on nominal capital gains was 20 percent.Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)   -20 percent
B)   20 percent
C)   42 percent
D)   64 percentE) B) and D)
F) A) and D)

Question 20

Mitch makes payments on a car loan.If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128,what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Accepted Answer

He was expecting it ...

Exam 30: Money Growth and Inflation

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

The supply of money increases when

Correct Answer
verified

Other things the same,an increase in velocity means that

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct Answer
verified

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Correct Answer
verified

If velocity = 3.5,the quantity of money = 15,000,and the price level = 1.2,then the real value of output is

Correct Answer
verified

Mitch makes payments on a car loan.If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128,what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Correct Answer
verified
He was expecting it ...
View Answer

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80.In 2011 tuition was $12,000 and the price index was 320.Which of the following is correct.

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

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Correct Answer
verified

The velocity of money is

Correct Answer
verified

Monetary neutrality implies that an increase in the quantity of money will

Correct Answer
verified

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Correct Answer
verified

Wealth is redistributed from debtors to creditors when inflation is

Correct Answer
verified

Correct Answer
verified

Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

Correct Answer
verified

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.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Correct Answer
verified

Correct Answer
verified

The quantity theory of money

Correct Answer
verified

Exam 30: Money Growth and Inflation

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

The supply of money increases when

Correct AnswerverifiedShow Answer

Other things the same,an increase in velocity means that

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct AnswerverifiedShow Answer

If the Fed increases the money supply,the equilibrium value of money decreases and the equilibrium price level increases.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve sells bonds,then the money supply curve

Correct AnswerverifiedShow Answer

If velocity = 3.5,the quantity of money = 15,000,and the price level = 1.2,then the real value of output is

Correct AnswerverifiedShow Answer

Mitch makes payments on a car loan.If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128,what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Correct AnswerverifiedHe was expecting it ...View AnswerShow Answer

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80.In 2011 tuition was $12,000 and the price index was 320.Which of the following is correct.

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

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Correct AnswerverifiedShow Answer

The velocity of money is

Correct AnswerverifiedShow Answer

Monetary neutrality implies that an increase in the quantity of money will

Correct AnswerverifiedShow Answer

You put money into an account that earns a 5 percent nominal interest rate.The inflation rate is 3 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Correct AnswerverifiedShow Answer

Wealth is redistributed from debtors to creditors when inflation is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Inflation distorts savings when real interest income,rather than nominal interest income,is taxed.

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.Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The quantity theory of money

Correct AnswerverifiedShow Answer

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He was expecting it ...
View Answer

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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.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Correct Answer
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Correct Answer
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Correct Answer
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