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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Accepted Answer

A)   $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
B)   8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
C)   $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
D)   8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.E) B) and C)
F) A) and C)

Question 4

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Accepted Answer

A)   inflation averaged 8% per year and the real rate of return was 9%.
B)   inflation averaged 11% per year and the real rate of return was 17%.
C)   inflation averaged 5% per year and the real rate of return was 4%.
D)   inflation averaged 1% per year and the real rate of return was 6%.E) All of the above
F) A) and D)

Question 5

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Accepted Answer

The answer of You hear an economist state the following:...

Question 6

During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands

Accepted Answer

A)   decreased. Other things the same, a decrease in velocity decreases the price level.
B)   decreased. Other things the same, a decrease in velocity increases the price level.
C)   increased. Other things the same, an increase in velocity decreases the price level.
D)   increased. Other things the same, an increase in velocity increases the price level.E) A) and B)
F) B) and C)

Question 7

One benefit of low inflation is that it _____ the variability of relative price changes. Therefore, resources are _____ likely to be better allocated.

Accepted Answer

The answer of One benefit of low inflation is that...

Question 8

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

Accepted Answer

A)   increases the price level and increases the value of money.
B)   increases the price level and decreases the value of money.
C)   decreases the price level and increases the value of money.
D)   decreases the price level and decreases the value of money.E) A) and D)
F) C) and D)

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. 
-Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then

Accepted Answer

A)   when the money market is in equilibrium, one dollar purchases one-half of a basket of goods and services.
B)   when the money market is in equilibrium, one unit of goods and services sells for 2 dollars.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.375.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 10

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Accepted Answer

nominal, r...

Question 11

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

Accepted Answer

A)   If velocity is stable and money is neutral, 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) C) and D)
F) None of the above

Question 12

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 13

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

Accepted Answer

A)   both the nominal and the real interest rate fall.
B)   neither the nominal nor the real interest rate fall.
C)   the nominal interest rate falls, but the real interest rate does not.
D)   the real interest rate falls, but the nominal interest rate does not.E) B) and C)
F) A) and D)

Question 14

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 15

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

Accepted Answer

That V is ...

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

Question 17

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

Accepted Answer

A)   increases the price level by more than 4 percent.
B)   increases the price level by 4 percent.
C)   increases the price level by less than 4 percent.
D)   increases real GDP by 4 percent.E) All of the above
F) C) and D)

Question 18

When the money market is drawn with the value of money on the vertical axis, the value of money decreases if

Accepted Answer

A)   either money demand or money supply shifts right.
B)   either money demand or money supply shifts left.
C)   money demand shifts right or money supply shifts left.
D)   money demand shifts left or money supply shifts right.E) A) and B)
F) A) and C)

Question 19

Which of the following statements about U.S. inflation is not correct?

Accepted Answer

A)   Low inflation was viewed as a triumph of President Carter's economic policy.
B)   There were long periods in the nineteenth century during which prices fell.
C)   The U.S. public has viewed inflation rates of even 7 percent as a major economic problem.
D)   The U.S. inflation rate has varied over time, but international data show even more variation.E) A) and D)
F) A) and C)

Question 20

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Accepted Answer

A)   Y or V rise
B)   Y or V fall
C)   Y rises or V falls
D)   Y falls or V risesE) None of the above
F) B) and C)

Exam 30: Money Growth and Inflation

During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands

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

Correct Answer
verified

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

Correct Answer
verified

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

Correct Answer
verified

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Correct Answer
verified

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

Correct Answer
verified

The ___ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _ interest rate and the ___.

Correct Answer
verified
nominal, r...
View Answer

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

Correct Answer
verified

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

Correct Answer
verified

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Which of the following statements about U.S. inflation is not correct?

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, the value of money decreases if

Correct Answer
verified

One benefit of low inflation is that it _ the variability of relative price changes. Therefore, resources are _ likely to be better allocated.

Correct Answer
verified

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Correct Answer
verified

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

Correct Answer
verified

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

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

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Correct Answer
verified

Exam 30: Money Growth and Inflation

During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands

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

Correct AnswerverifiedShow Answer

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that M is fixed. According to the quantity equation, which of the following would make the price level higher?

Correct AnswerverifiedShow Answer

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then

Correct AnswerverifiedShow Answer

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Correct Answerverifiednominal, r...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Correct AnswerverifiedShow Answer

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about U.S. inflation is not correct?

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, the value of money decreases if

Correct AnswerverifiedShow Answer

One benefit of low inflation is that it _____ the variability of relative price changes. Therefore, resources are _____ likely to be better allocated.

Correct AnswerverifiedShow Answer

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

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

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The ___ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _ interest rate and the ___.

Correct Answer
verified
nominal, r...
View Answer

Correct Answer
verified

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

One benefit of low inflation is that it _ the variability of relative price changes. Therefore, resources are _ likely to be better allocated.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
That V is ...
View Answer

Correct Answer
verified