Question 1

In the long run 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) C) and D)
F) A) and D)

Question 2

Use the figure below for the following questions.
Figure 30-1 1 to MS2? A) The demand for goods and services decreases. B) The economy's ability to produce goods and services increases. C) The equilibrium price level increases. D) The equilibrium value of money increases." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1. What happens when the money supply curve shifts from MS1 to MS2?

Accepted Answer

A)  The demand for goods and services decreases.
B)  The economy's ability to produce goods and services increases.
C)  The equilibrium price level increases.
D)  The equilibrium value of money increases.E) None of the above
F) All of the above

Question 3

According to the classical dichotomy, which of the following is NOT influenced by monetary factors?

Accepted Answer

A)  nominal GDP and nominal interest rates
B)  real wages and real GDP
C)  the price level and nominal GDP.
D)  the price level and nominal GDPE) B) and C)
F) All of the above

Question 4

Based on the quantity equation, if M = 125, V = 4, and Y = 200, what is P?

Accepted Answer

A)  0.5
B)  1
C)  1.5
D)  2.5E) None of the above
F) B) and C)

Question 5

Which of the following best describes how the cost of unexpected inflation is distributed?

Accepted Answer

A)  Unexpected inflation has a greater cost for those who borrow than those who save
B)  Unexpected inflation has a greater cost for those who hold a little money than for those who hold a lot of money
C)  Unexpected inflation has a greater cost for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage
D)  Unexpected inflation has a greater cost for savers in high income tax brackets than for savers in low income tax bracketsE) A) and D)
F) All of the above

Question 6

How can people avoid the inflation tax?

Accepted Answer

A)  by reducing savings
B)  by not filing a tax return
C)  by reducing cash holdings
D)  by spending lessE) A) and B)
F) B) and C)

Question 7

In order to maintain stable prices, which of the following must the central bank do?

Accepted Answer

A)  maintain low interest rates
B)  keep unemployment low
C)  tightly control the money supply
D)  sell indexed bondsE) All of the above
F) C) and D)

Question 8

Economists agree that increases in the money supply growth rate increases 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 9

For a given real interest rate, which of the following best describes the effects of an increase in inflation?

Accepted Answer

A)  Inflation makes the real interest rate decrease, which encourages savings.
B)  Inflation makes the real interest rate decrease, which discourages savings.
C)  Inflation makes the real interest rate increase, which encourages savings.
D)  Inflation makes the real interest rate increase, which discourages savings.E) B) and D)
F) A) and B)

Question 10

When deciding how much to save, which of the following interest rates do people usually 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 ratesE) All of the above
F) B) and C)

Question 11

Use the figure below for the following questions.
Figure 30-1 2 and the value of money is 2, which of the following relationships holds? A) The value of money is less than its equilibrium level. B) The price level is higher than its equilibrium level. C) Money demand is greater than the money supply. D) The money supply is greater than money demand." 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, which of the following relationships holds?

Accepted Answer

A)  The value of money is less than its equilibrium level.
B)  The price level is higher than its equilibrium level.
C)  Money demand is greater than the money supply.
D)  The money supply is greater than money demand.E) All of the above
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

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the Bank of Canada sells governmen...

Question 14

Everything else being the same, what is the effect of an increase in interest rates on the price level? Discuss the process of adjustment to the new equilibrium.

Accepted Answer

An increase in interest rates makes the ...

Question 15

What does the principle of monetary neutrality imply?

Accepted Answer

A)  An increase in the money supply will increase real GDP and the price level.
B)  An increase in the money supply will increase real GDP, but not the price level.
C)  An increase in the money supply will increase the price level, but not real GDP.
D)  An increase in the money supply will increase neither the price level nor real GDP.E) C) and D)
F) B) and C)

Question 16

How is velocity computed?

Accepted Answer

A)  (P * Y) /M
B)  (P * M) /Y
C)  (Y * M) /P
D)  (Y * M) /VE) None of the above
F) C) and D)

Question 17

Arnold puts money into an account. One year later he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods. Which of the following is consistent with these facts?

Accepted Answer

A)  The nominal interest rate was 7 percent and the inflation rate was 4 percent.
B)  The nominal interest rate was 10 percent and the inflation rate was 3 percent.
C)  The nominal interest rate was 3 percent and the inflation rate was -10 percent.
D)  The nominal interest rate was 4 percent and the inflation rate was -3 percent.E) B) and C)
F) None of the above

Question 18

In this problem we try to establish a link between the quantity equation, MS1U1P1dS1S1P0V = PY, and the money demand-money supply diagram (MS1U1P1dS1S1P0 is the quantity of money demanded).
-In a graph having the price level P on the vertical axis and the quantity of money M on the horizontal axis and considering V and Y independent on the price level or the quantity of money demanded, draw the Md - P curve that is implied by the quantity equation.

Accepted Answer

The quantity equation can be written und...

Question 19

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the effects of an increase in money supply?

Accepted Answer

A)  It creates an excess supply of money, causing people to spend more.
B)  It creates an excess supply of money, causing people to spend less.
C)  It creates an excess demand for money, causing people to spend more.
D)  It creates an excess demand for money, causing people to spend less.E) All of the above
F) A) and B)

Question 20

When the money market is depicted in a graph with the value of money on the vertical axis, as the price level increases, which of the following happens to the value of money?

Accepted Answer

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

Exam 11: Money Growth and Inflation

Everything else being the same, what is the effect of an increase in interest rates on the price level? Discuss the process of adjustment to the new equilibrium.

Correct Answer
verified
An increase in interest rates makes the ...
View Answer

When deciding how much to save, which of the following interest rates do people usually care most about?

Correct Answer
verified

According to the classical dichotomy, which of the following is NOT influenced by monetary factors?

Correct Answer
verified

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Correct Answer
verified
When the Bank of Canada sells governmen...
View Answer

For a given real interest rate, which of the following best describes the effects of an increase in inflation?

Correct Answer
verified

In order to maintain stable prices, which of the following must the central bank do?

Correct Answer
verified

Based on the quantity equation, if M = 125, V = 4, and Y = 200, what is P?

Correct Answer
verified

How is velocity computed?

Correct Answer
verified

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. What happens when the money supply curve shifts from MS₁ to MS₂?

Correct Answer
verified

In the long run when money is neutral, which of the following increases when the money supply growth rate increases?

Correct Answer
verified

Correct Answer
verified
The quantity equation can be written und...
View Answer

When the money market is depicted in a graph with the value of money on the vertical axis, as the price level increases, which of the following happens to the value of money?

Correct Answer
verified

Which of the following best describes how the cost of unexpected inflation is distributed?

Correct Answer
verified

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the effects of an increase in money supply?

Correct Answer
verified

How can people avoid the inflation tax?

Correct Answer
verified

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

Correct Answer
verified
Typically, the government in countries t...
View Answer

What does the principle of monetary neutrality imply?

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

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the money supply is MS₂ and the value of money is 2, which of the following relationships holds?

Correct Answer
verified

Arnold puts money into an account. One year later he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods. Which of the following is consistent with these facts?

Correct Answer
verified

Exam 11: Money Growth and Inflation

Everything else being the same, what is the effect of an increase in interest rates on the price level? Discuss the process of adjustment to the new equilibrium.

Correct AnswerverifiedAn increase in interest rates makes the ...View AnswerShow Answer

When deciding how much to save, which of the following interest rates do people usually care most about?

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is NOT influenced by monetary factors?

Correct AnswerverifiedShow Answer

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Correct Answerverified When the Bank of Canada sells governmen...View AnswerShow Answer

For a given real interest rate, which of the following best describes the effects of an increase in inflation?

Correct AnswerverifiedShow Answer

In order to maintain stable prices, which of the following must the central bank do?

Correct AnswerverifiedShow Answer

Based on the quantity equation, if M = 125, V = 4, and Y = 200, what is P?

Correct AnswerverifiedShow Answer

How is velocity computed?

Correct AnswerverifiedShow Answer

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. What happens when the money supply curve shifts from MS1 to MS2?

Correct AnswerverifiedShow Answer

In the long run when money is neutral, which of the following increases when the money supply growth rate increases?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe quantity equation can be written und...View AnswerShow Answer

When the money market is depicted in a graph with the value of money on the vertical axis, as the price level increases, which of the following happens to the value of money?

Correct AnswerverifiedShow Answer

Which of the following best describes how the cost of unexpected inflation is distributed?

Correct AnswerverifiedShow Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, which of the following best describes the effects of an increase in money supply?

Correct AnswerverifiedShow Answer

How can people avoid the inflation tax?

Correct AnswerverifiedShow Answer

Economists agree that increases in the money supply growth rate increases 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

What does the principle of monetary neutrality imply?

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

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, which of the following relationships holds?

Correct AnswerverifiedShow Answer

Arnold puts money into an account. One year later he sees that he has 7 percent more dollars and that his money will buy 3 percent more goods. Which of the following is consistent with these facts?

Correct AnswerverifiedShow Answer

Correct Answer
verified
An increase in interest rates makes the ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the Bank of Canada sells governmen...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. What happens when the money supply curve shifts from MS₁ to MS₂?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The quantity equation can be written und...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Typically, the government in countries t...
View Answer

Correct Answer
verified

Correct Answer
verified

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the money supply is MS₂ and the value of money is 2, which of the following relationships holds?

Correct Answer
verified

Correct Answer
verified