Question 1

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 the

Accepted Answer

A)  the value of money.
B)  real interest rates.
C)  nominal interest rates.
D)  money supply.E) None of the above
F) All of the above

Question 2

When the price level rises,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) C) and D)
F) A) and D)

Question 3

The price level is a

Accepted Answer

A)  relative variable.
B)  dichotomous variable
C)  real variable.
D)  nominal variable.E) C) and D)
F) All of the above

Question 4

When money is neutral,which of the following increases when the money supply growth rate increases?

Accepted Answer

A)  real output growth
B)  real interest rates
C)  nominal interest rates
D)  the money supply divided by the price levelE) All of the above
F) C) and D)

Question 5

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

Accepted Answer

A)  2 percent.
B)  4 percent.
C)  6 percent.
D)  8 percent.E) A) and B)
F) B) and D)

Question 6

The source of hyperinflations is primarily

Accepted Answer

A)  lower output growth.
B)  continuing declines in velocity.
C)  increased money supply growth.
D)  continuing increases in money demand.E) All of the above
F) A) and B)

Question 7

An increase in the price level makes the value of money

Accepted Answer

A)  increase, so people want to hold more of it.
B)  increase, so people want to hold less of it.
C)  decrease, so people want to hold more of it.
D)  decrease, so people want to hold less of it.E) A) and B)
F) C) and D)

Question 8

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

Question 9

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 10

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) None of the above

Question 11

When deciding how much to save,people care most about

Accepted Answer

A)  after-tax nominal interest rates.
B)  after-tax real interest rates.
C)  before-tax real interest rates.
D)  before-tax nominal interest rates.E) B) and C)
F) A) and D)

Question 12

The Fisher effect says that

Accepted Answer

A)  the nominal interest rate adjusts one for one with the inflation rate.
B)  the growth rate of the money supply determines the inflation rate.
C)  real variables are heavily influenced by the monetary system.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 13

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

Accepted Answer

A)  the inflation rate and real interest rates.
B)  the inflation rate, but not real interest rates.
C)  real interest rates, but not the inflation rate.
D)  neither the inflation rate nor real interest rates.E) All of the above
F) B) and D)

Question 14

Wealth is distributed from creditors to debtors 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 B)
F) None of the above

Question 15

As the price level decreases,the value of money

Accepted Answer

A)  increases, so people want to hold more of it.
B)  increases, so people want to hold less of it.
C)  decreases, so people want to hold more of it.
D)  decreases, so people want to hold less of it.E) A) and B)
F) All of the above

Question 16

If a country had deflation,

Accepted Answer

A)  the nominal interest rate would be greater than the real interest rate.
B)  the real interest rate would be greater than the nominal interest rate.
C)  the real interest rate would equal the nominal interest rate.
D)  None of the above is necessarily correct.E) A) and B)
F) A) and C)

Question 17

Which of the following can a country increase in the long run by increasing its money growth rate?

Accepted Answer

A)  the nominal wage divided by the price level
B)  real output
C)  real interest rates
D)  None of the above is correct.E) A) and D)
F) C) and D)

Question 18

Which of the following is accurate?

Accepted Answer

A)  Monetary policy is neutral in both the short run and the long run.
B)  Though monetary policy is neutral in the long run, it may have effects on real variables in the short run.
C)  Monetary policy has profound effects on real variables in both the short run and the long run.
D)  Monetary policy has profound effects on real variables in the long run, but is neutral in the short run.E) A) and C)
F) B) and D)

Question 19

You put money in an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

Accepted Answer

A)  1.2 percent
B)  2.8 percent
C)  4.8 percent
D)  None of the above is correct.E) All of the above
F) A) and D)

Question 20

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

Accepted Answer

A)  money demand slopes up and money supply is horizontal.
B)  money demand slopes down and money supply is vertical.
C)  money demand slopes up and money supply is vertical.
D)  money demand slopes down and money supply is horizontal.E) B) and C)
F) A) and B)

Exam 30: Money Growth and Inflation

When the price level rises,the number of dollars needed to buy a representative basket of goods

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The Fisher effect says that

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The source of hyperinflations is primarily

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When deciding how much to save,people care most about

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

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Wealth is distributed from creditors to debtors when inflation is

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The price of a Honda Accord

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If a country had deflation,

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The supply of money increases when

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

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As the price level decreases,the value of money

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The price level is a

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

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Which of the following is accurate?

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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 the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When money is neutral,which of the following increases when the money supply growth rate increases?

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You put money in an account and earn a real interest rate of 4 percent.Inflation is 2 percent,and your marginal tax rate is 20 percent.What is your after-tax real rate of interest?

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Which of the following can a country increase in the long run by increasing its money growth rate?

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An increase in the price level makes the value of money

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