Question 1

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

Question 2

As the price level falls,the value of money falls.

Accepted Answer

A) True 
 B)False

Question 3

Figure 30-2.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 30-2.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) None of the above
F) All of the above

Question 4

The price level is a

Accepted Answer

A)   relative variable.
B)   dichotomous variable
C)   real variable.
D)   nominal variable.E) A) and B)
F) A) and C)

Question 5

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

Question 6

According to the quantity equation,if P = 1.5,Y = 6,000,and M = 4,000,then V =

Accepted Answer

A)   2.25.
B)   3.00.
C)   6.50.
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 7

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) None of the above
F) All of the above

Question 8

When the money market is drawn with the value of money on the vertical axis,the value of money increases 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 D)
F) All of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The price level falls.This might be because the Federal Reserve

Accepted Answer

A)   bought bonds which raised the money supply.
B)   bought bonds which reduced the money supply.
C)   sold bonds which raised the money supply.
D)   sold bonds which reduced the money supply.E) B) and C)
F) A) and D)

Question 11

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Accepted Answer

A)   the money supply must have increased,perhaps because the Fed bought bonds.
B)   the money supply must have increased,perhaps because the Fed sold bonds.
C)   the money supply must have decreased,perhaps because the Fed bought bonds.
D)   the money supply must have decreased,perhaps because the Fed sold bonds.E) All of the above
F) B) and C)

Question 12

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

Question 13

Last year,Tealandia produced 50,000 bags of green tea,and tea was the only good Tealandia produced.Each bag sold at 4 units each of Tealandia's currency - the Leaf.Tealandia's money supply was 40,000.What was the velocity of money in Tealandia?

Accepted Answer

A)   20
B)   5
C)   1/20
D)   1/5E) None of the above
F) B) and D)

Question 14

You bought some shares of stock and,over the next year,the price per share increased by 5 percent,as did the price level.Before taxes,you experienced

Accepted Answer

A)   both a nominal gain and a real gain,and you paid taxes on the nominal gain.
B)   both a nominal gain and a real gain,and you paid taxes only on the real gain.
C)   a nominal gain,but no real gain,and you paid taxes on the nominal gain.
D)   a nominal gain,but no real gain,and you paid no taxes on the transaction.E) A) and D)
F) All of the above

Question 15

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

Question 16

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

Accepted Answer

A)   increases,so the quantity of money demanded increases.
B)   increases,so the quantity of money demanded decreases.
C)   decreases,so the quantity of money demanded decreases.
D)   decreases,so the quantity of money demanded increases.E) A) and C)
F) B) and C)

Question 17

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Accepted Answer

A)   decrease that benefited creditors at the expense of debtors.
B)   decrease that benefited debtors at the expense of creditors.
C)   increase that benefited creditors at the expense of debtors.
D)   increase that benefited debtors at the expense of creditors.E) A) and D)
F) A) and B)

Question 18

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 2.At the end of 2008 the relevant money-demand curve was the one labeled MD1.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2008? A)  -43 percent B)  -57 percent C)  57 percent D)  75 percent" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2.At the end of 2007 the relevant money-demand curve was the one labeled MD2.At the end of 2008 the relevant money-demand curve was the one labeled MD1.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2008?

Accepted Answer

A)   -43 percent
B)   -57 percent
C)   57 percent
D)   75 percentE) B) and D)
F) C) and D)

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not correct?

Accepted Answer

A)   The inflation rate is measured as the percentage change in a price index.
B)   For the last 40 or so years,U.S.inflation hasn't shown much variation from its average rate of about 2 percent.
C)   During the 19th century there were long periods of falling prices.
D)   Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes.E) A) and B)
F) A) and C)

Exam 30: Money Growth and Inflation

Correct Answer
verified

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

Correct Answer
verified

According to the quantity equation,if P = 1.5,Y = 6,000,and M = 4,000,then V =

Correct Answer
verified

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Correct Answer
verified

The supply of money increases when

Correct Answer
verified

As the price level falls,the value of money falls.

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

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

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

Correct Answer
verified

The price level falls.This might be because the Federal Reserve

Correct Answer
verified

Correct Answer
verified

The price level is a

Correct Answer
verified

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

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

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Correct Answer
verified

You bought some shares of stock and,over the next year,the price per share increased by 5 percent,as did the price level.Before taxes,you experienced

Correct Answer
verified

Last year,Tealandia produced 50,000 bags of green tea,and tea was the only good Tealandia produced.Each bag sold at 4 units each of Tealandia's currency - the Leaf.Tealandia's money supply was 40,000.What was the velocity of money in Tealandia?

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

The source of all four classic hyperinflations was high rates of money growth.

Correct Answer
verified

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

Correct Answer
verified

Exam 30: Money Growth and Inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the quantity equation,if P = 1.5,Y = 6,000,and M = 4,000,then V =

Correct AnswerverifiedShow Answer

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Correct AnswerverifiedShow Answer

The supply of money increases when

Correct AnswerverifiedShow Answer

As the price level falls,the value of money falls.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

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

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

Correct AnswerverifiedShow Answer

The price level falls.This might be because the Federal Reserve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The price level is a

Correct AnswerverifiedShow Answer

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

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

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Correct AnswerverifiedShow Answer

You bought some shares of stock and,over the next year,the price per share increased by 5 percent,as did the price level.Before taxes,you experienced

Correct AnswerverifiedShow Answer

Last year,Tealandia produced 50,000 bags of green tea,and tea was the only good Tealandia produced.Each bag sold at 4 units each of Tealandia's currency - the Leaf.Tealandia's money supply was 40,000.What was the velocity of money in Tealandia?

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

The source of all four classic hyperinflations was high rates of money growth.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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