Question 1

Over time both real GDP and the price level have trended upward. Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?

Accepted Answer

A)   both the upward trend in real GDP and the upward trend in the price level
B)   the upward trend in real GDP but not the upward trend in the price level
C)   the upward trend in the price level but not the upward trend in real GDP
D)   neither the upward trend in the price level nor the upward trend in real GDPE) A) and B)
F) A) and C)

Question 2

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Accepted Answer

A)   2,000.
B)   200,000.
C)   12,500.
D)   32,000.E) B) and D)
F) All of the above

Question 3

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Accepted Answer

A)   Unemployment
B)   Productivity
C)   Inflation
D)   Monetary policyE) All of the above
F) B) and D)

Question 4

When there is inflation, 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) A) and B)
F) B) and D)

Question 5

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Accepted Answer

A)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected.
B)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected.
C)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected.
D)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.E) B) and D)
F) B) and C)

Question 6

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Accepted Answer

The answer of Money neutrality states that a change in...

Question 7

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Accepted Answer

The answer of The nominal interest rate is eight percent...

Question 8

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Accepted Answer

The value ...

Question 9

If Y and M are constant and V doubles, the quantity equation implies that the price level

Accepted Answer

A)   falls to half its original level.
B)   doubles.
C)   more than doubles.
D)   does not change.E) All of the above
F) C) and D)

Question 10

In which case below is the real interest rate the highest?

Accepted Answer

A)   the nominal interest rate = 1% and inflation = 3%
B)   the nominal interest rate = 6% and inflation = 4%
C)   the nominal interest rate = 2% and inflation = -1%
D)   the nominal interest rate = 2% and inflation = 1%E) C) and D)
F) B) and C)

Question 11

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Accepted Answer

A)   Jane's nominal income and real income decreased this year.
B)   Jane's nominal income decreased this year, but her real income increased.
C)   Jane's nominal income and real income increased this year.
D)   Jane's nominal income increased this year, but her real income decreased.E) C) and D)
F) A) and C)

Question 12

A reduction in the inflation rate would make relative prices

Accepted Answer

A)   less variable, making it more likely that resources will be allocated to their best use.
B)   less variable, making it less likely that resources will be allocated to their best use.
C)   more variable, making it more likely that resources will be allocated to their best use.
D)   more variable, making it less likely that resources will be allocated to their best use.E) A) and B)
F) B) and D)

Question 13

If inflation is higher 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 D)
F) A) and C)

Question 14

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Accepted Answer

A)   the price level
B)   nominal wages
C)   nominal GDP
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 15

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 B)
F) B) and D)

Question 16

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. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 20,000 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)   2
C)   8
D)   10E) None of the above
F) A) and C)

Question 17

When the Consumer Price Index increases from 100 to 120

Accepted Answer

A)   more money is needed to buy the same amount of goods, so the value of money falls.
B)   more money is needed to buy the same amount of goods, so the value of money rises.
C)   less money is needed to buy the same amount of goods, so the value of money falls.
D)   less money is needed to buy the same amount of goods, so the value of money rises.E) A) and B)
F) All of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 20

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Accepted Answer

That V is ...

Exam 12: Money Growth and Inflation

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Correct Answer
verified

In which case below is the real interest rate the highest?

Correct Answer
verified

A reduction in the inflation rate would make relative prices

Correct Answer
verified

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

Correct Answer
verified

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Correct Answer
verified
The value ...
View Answer

When the Consumer Price Index increases from 100 to 120

Correct Answer
verified

Correct Answer
verified

Over time both real GDP and the price level have trended upward. Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?

Correct Answer
verified

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Correct Answer
verified

Inflation is costly only if it is unanticipated.

Correct Answer
verified

When there is inflation, the number of dollars needed to buy a representative basket of goods

Correct Answer
verified

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Correct Answer
verified

If Y and M are constant and V doubles, the quantity equation implies that the price level

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

If inflation is higher than what was expected,

Correct Answer
verified

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct Answer
verified

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Correct Answer
verified
That V is ...
View Answer

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Correct Answer
verified

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Correct Answer
verified

Money neutrality states that a change in the money supply affects _ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _.

Correct Answer
verified

Exam 12: Money Growth and Inflation

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Correct AnswerverifiedShow Answer

In which case below is the real interest rate the highest?

Correct AnswerverifiedShow Answer

A reduction in the inflation rate would make relative prices

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Correct AnswerverifiedThe value ...View AnswerShow Answer

When the Consumer Price Index increases from 100 to 120

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Over time both real GDP and the price level have trended upward. Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?

Correct AnswerverifiedShow Answer

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

Correct AnswerverifiedShow Answer

When there is inflation, the number of dollars needed to buy a representative basket of goods

Correct AnswerverifiedShow Answer

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Correct AnswerverifiedShow Answer

If Y and M are constant and V doubles, the quantity equation implies that the price level

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

If inflation is higher than what was expected,

Correct AnswerverifiedShow Answer

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct AnswerverifiedShow Answer

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Correct AnswerverifiedThat V is ...View AnswerShow Answer

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Correct AnswerverifiedShow Answer

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Correct AnswerverifiedShow Answer

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The value ...
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
That V is ...
View Answer

Correct Answer
verified

Correct Answer
verified

Money neutrality states that a change in the money supply affects _ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _.

Correct Answer
verified