Question 1

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically, the government in countries t...

Question 2

Suppose there is a surplus in the money market.

Accepted Answer

A)  This could have been created by an increase in the money supply. The value of money will rise.
B)  This could have been created by an increase in the money supply. The value of money will fall.
C)  This could have been created by a decrease in the money supply. The value of money will rise.
D)  This could have been created by a decrease in the money supply. The value of money will fall.E) B) and C)
F) All of the above

Question 3

Figure 30-1 2 and the value of money is 2, then there is an excess A) demand for money that is represented by the distance between points A and C. B) demand for money that is represented by the distance between points A and B. C) supply of money that is represented by the distance between points A and C. D) supply of money that is represented by the distance between points A and B." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Accepted Answer

A)  demand for money that is represented by the distance between points A and C.
B)  demand for money that is represented by the distance between points A and B.
C)  supply of money that is represented by the distance between points A and C.
D)  supply of money that is represented by the distance between points A and B.E) None of the above
F) A) and D)

Question 4

Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Accepted Answer

A) True 
 B)False

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

Economists agree that

Accepted Answer

A)  neither high inflation nor moderate inflation is very costly.
B)  both high and moderate inflation are quite costly.
C)  high inflation is costly, but they disagree about the costs of moderate inflation.
D)  moderate inflation is as costly as high inflation.E) B) and C)
F) A) and C)

Question 7

When inflation falls, 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) All of the above

Question 8

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Accepted Answer

A)  The nominal interest rate was 13.5 percent and the inflation rate was 7.5 percent.
B)  The nominal interest rate was 13.5 percent and the inflation rate was 1.5 percent.
C)  The nominal interest rate was 6 percent and the inflation rate was -1.5 percent.
D)  The nominal interest rate was 6 percent and the inflation rate was 7.5 percent.E) B) and D)
F) A) and B)

Question 9

Inflation can be measured by the

Accepted Answer

A)  change in the consumer price index.
B)  percentage change in the consumer price index.
C)  percentage change in the price of a specific commodity.
D)  change in the price of a specific commodity.E) All of the above
F) C) and D)

Question 10

Suppose over some period of time the money supply tripled, velocity was unchanged, and real GDP doubled. According to the quantity equation the price level is now

Accepted Answer

A)  6 times its old value.
B)  3 times its old value.
C)  1.5 times its old value.
D)  0.75 times its old valueE) B) and C)
F) A) and C)

Question 11

Shoeleather costs and menu costs are both costs of anticipated inflation.

Accepted Answer

A) True 
 B)False

Question 12

The data on hyperinflation show a clear link between the quantity of money and

Accepted Answer

A)  the price level.
B)  growth rate of GDP.
C)  unemployment rate.
D)  velocity.E) A) and B)
F) All of the above

Question 13

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Accepted Answer

The inflation tax refers to the fact tha...

Question 14

Over the past 80 years, prices in the U.S. have risen on average about

Accepted Answer

A)  2 percent per year.
B)  4 percent per year.
C)  3.6 percent per year.
D)  6 percent per year.E) All of the above
F) B) and C)

Question 15

Governments may prefer an inflation tax to some other type of tax because the inflation tax

Accepted Answer

A)  is easier to impose.
B)  reduces inflation.
C)  falls mainly on high-income individuals.
D)  reduces the real cost of government expenditure.E) A) and B)
F) A) and C)

Question 16

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Accepted Answer

A)  M = 800, V = 16
B)  M = 150, V = 3
C)  M = 400, V = 2
D)  M = 200, V = 2E) B) and D)
F) All of the above

Question 17

Which of the following is correct?

Accepted Answer

A)  The classical dichotomy separates real and nominal variables.
B)  Monetary neutrality is the proposition that changes in the money supply do not change real variables.
C)  When studying long-run changes in the economy, the neutrality of money offers a good description of how the world works.
D)  All of the above are correct.E) A) and C)
F) C) and D)

Question 18

If the price level last year was 180 and this year it is 176, then

Accepted Answer

A)  there was inflation of 2.3 percent.
B)  there was inflation of 4.0 percent.
C)  there was deflation of 2.2 percent.
D)  there was deflation of 4.0 percent.E) B) and C)
F) A) and D)

Question 19

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Accepted Answer

A)  shifts right, causing the price level to rise.
B)  shifts right, causing the price level to fall.
C)  shifts left, causing the price level to rise.
D)  shifts left, causing the price level to fall.E) A) and D)
F) None of the above

Question 20

Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =

Accepted Answer

A)  0.33.
B)  2.0.
C)  4.5.
D)  0.5.E) A) and B)
F) All of the above

Exam 30: Money Growth and Inflation

Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =

Correct AnswerverifiedShow Answer

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?

Correct AnswerverifiedTypically, the government in countries t...View AnswerShow Answer

Suppose over some period of time the money supply tripled, velocity was unchanged, and real GDP doubled. According to the quantity equation the price level is now

Correct AnswerverifiedShow Answer

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

Correct AnswerverifiedShow Answer

Over the past 80 years, prices in the U.S. have risen on average about

Correct AnswerverifiedShow Answer

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Correct AnswerverifiedShow Answer

Economists agree that

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When inflation falls, people

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Which of the following is correct?

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Inflation can be measured by the

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Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30 percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7 percent.

Correct AnswerverifiedShow Answer

Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess

Correct AnswerverifiedShow Answer

The data on hyperinflation show a clear link between the quantity of money and

Correct AnswerverifiedShow Answer

Suppose there is a surplus in the money market.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

Correct AnswerverifiedShow Answer

What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Correct AnswerverifiedThe inflation tax refers to the fact tha...View AnswerShow Answer

If the price level last year was 180 and this year it is 176, then

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

Shoeleather costs and menu costs are both costs of anticipated inflation.

Correct AnswerverifiedShow Answer

Governments may prefer an inflation tax to some other type of tax because the inflation tax

Correct AnswerverifiedShow Answer

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Typically, the government in countries t...
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Figure 30-1 -Refer to Figure 30-1. If the money supply is MS₂ and the value of money is 2, then there is an excess

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The inflation tax refers to the fact tha...
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Correct Answer
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