Question 1

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

Accepted Answer

A)  inflation and nominal interest rates, but does not change real interest rates.
B)  inflation, nominal interest rates, and real interest rates.
C)  inflation and real interest rates, but does not change nominal interest rates.
D)  nominal interest rates and real interest rates, but does not change inflation.E) B) and C)
F) All of the above

Question 2

If a country experienced deflation, then

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)  nominal GDP would be smaller than the money supply.E) A) and B)
F) A) and C)

Question 3

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 4

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Accepted Answer

A)  movement to the right along the money demand curve.
B)  movement to the left along the money demand curve.
C)  shift to the right of the money supply curve.
D)  shift to the left of the money supply curve.E) All of the above
F) None of the above

Question 5

Menu costs refers to

Accepted Answer

A)  resources used by people to maintain lower money holdings when inflation is high.
B)  resources used to price shop during times of high inflation.
C)  the distortion in incentives created by inflation when taxes do not adjust for inflation.
D)  the cost of more frequent price changes induced by higher inflation.E) C) and D)
F) B) and D)

Question 6

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

Accepted Answer

A)  the price level and nominal wages
B)  the price level, but not the nominal wage
C)  the nominal wage, but not the price level
D)  neither the nominal wage nor the price levelE) A) and B)
F) None of the above

Question 7

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False  False

Question 8

If the price level increased from 200 to 250, then what was the inflation rate?

Accepted Answer

A)  50 percent
B)  25 percent
C)  20 percent
D)  None of the above is correct.E) A) and B)
F) B) and D)

Question 9

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Accepted Answer

A)  velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P.
B)  velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P.
C)  velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P.
D)  velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P.E) B) and C)
F) A) and D) B

Question 10

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Accepted Answer

rapid money supply g...

Question 11

When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an

Accepted Answer

A)  excess demand for money, so the price level will rise.
B)  excess demand for money, so the price level will fall.
C)  excess supply of money, so the price level will rise.
D)  excess supply of money, so the price level will fall.E) A) and C)
F) All of the above

Question 12

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

Accepted Answer

A)  excess demand for money, so the price level will rise.
B)  excess demand for money, so the price level will fall.
C)  excess supply of money, so the price level will rise.
D)  excess supply of money, so the price level will fall.E) All of the above
F) A) and B)

Question 13

Deflation

Accepted Answer

A)  increases incomes and enhances the ability of debtors to pay off their debts.
B)  increases incomes and reduces the ability of debtors to pay off their debts.
C)  decreases incomes and enhances the ability of debtors to pay off their debts.
D)  decreases incomes and reduces the ability of debtors to pay off their debts.E) B) and C)
F) A) and B) D

Question 14

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 is negatively related to the velocity of money.
C)  real variables are heavily influenced by the monetary system.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 15

The evidence from hyperinflations indicates that money growth and inflation

Accepted Answer

A)  are positively related, which is consistent with the quantity theory of money.
B)  are positively related, which is not consistent with the quantity theory of money.
C)  are not related in a discernible fashion, which is consistent with the quantity theory of money.
D)  are not related in a discernible fashion, which is not consistent with the quantity theory of money.E) None of the above
F) B) and C)

Question 16

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 nominal interest rates.
B)  the inflation rate, but not nominal interest rates.
C)  nominal interest rates, but not the inflation rate.
D)  neither the inflation rate nor nominal interest rates.E) B) and D)
F) A) and B)

Question 17

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

Accepted Answer

debtors/bo...

Question 18

The United States has never had deflation.

Accepted Answer

A) True 
 B)False

Question 19

When inflation rises, people

Accepted Answer

A)  make less frequent trips to the bank and firms make less frequent price changes.
B)  make less frequent trips to the bank while firms make more frequent price changes.
C)  make more frequent trips to the bank while firms make less frequent price changes.
D)  make more frequent trips to the bank and firms make more frequent price changes.E) A) and B)
F) A) and C)

Question 20

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Accepted Answer

A)  real output only.
B)  nominal output only.
C)  the price level only.
D)  both the price level and nominal output.E) B) and D)
F) B) and C)

Exam 30: Money Growth and Inflation

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

Correct AnswerverifiedShow Answer

If a country experienced deflation, then

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

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Correct AnswerverifiedShow Answer

Menu costs refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

Correct AnswerverifiedFalse

If the price level increased from 200 to 250, then what was the inflation rate?

Correct AnswerverifiedShow Answer

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Correct AnswerverifiedB

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

Correct Answerverifiedrapid money supply g...View AnswerShow Answer

When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

Correct AnswerverifiedShow Answer

Deflation

Correct AnswerverifiedD

The Fisher effect says that

Correct AnswerverifiedShow Answer

The evidence from hyperinflations indicates that money growth and inflation

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

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

Correct Answerverifieddebtors/bo...View AnswerShow Answer

The United States has never had deflation.

Correct AnswerverifiedShow Answer

When inflation rises, people

Correct AnswerverifiedShow Answer

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in

Correct AnswerverifiedShow Answer

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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 _.

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False

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B

In the long run inflation is explained by . For countries that had hyperinflation this source of inflation arose primarily because the government .

Correct Answer
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rapid money supply g...
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D

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During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _ to _.

Correct Answer
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debtors/bo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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