Question 1

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Accepted Answer

A)   money growth must have been greater than the growth of real income.
B)   money growth must have been less than the growth of real income.
C)   prices fell during the 1970's.
D)   output fell during the 1970's.E) None of the above
F) A) and B)

Question 2

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Accepted Answer

A)   People who held money would feel poorer.
B)   Prices would rise.
C)   People who had lent money at a fixed interest rate would feel poorer.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 3

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Accepted Answer

double, re...

Question 4

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Accepted Answer

A) True 
 B)False

Question 5

When inflation rises, people tend to go to the bank

Accepted Answer

A)   more often, giving rise to menu costs.
B)   more often, giving rise to shoeleather costs.
C)   less often, giving rise to redistribution costs.
D)   less often, thereby lessening the severity of the inflation tax.E) A) and C)
F) B) and C)

Question 6

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80. In 2011 tuition was $12,000 and the price index was 320. Which of the following is correct?

Accepted Answer

A)   Nominal and real tuition were both higher in 1975.
B)   Nominal and real tuition were both higher in 2011.
C)   Nominal tuition was higher in 1975, real tuition was higher in 2011.
D)   Nominal tuition was higher in 2011, real tuition was higher in 1975.E) A) and B)
F) A) and C)

Question 7

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

Accepted Answer

A)   0.5 and the equilibrium value of money is 2.
B)   2 and the equilibrium value of money is 0.5.
C)   0.5 and the equilibrium value of money cannot be determined from the graph.
D)   2 and the equilibrium value of money cannot be determined from the graph.E) None of the above
F) All of the above

Question 8

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

Accepted Answer

A) True 
 B)False

Question 9

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by

Accepted Answer

A)   selling bonds on the open market, which would have raised the value of money.
B)   purchasing bonds on the open market, which would have raised the value of money.
C)   selling bonds on the open market, which would have raised the value of money.
D)   purchasing bonds on the open market, which would have lowered the value of money.E) All of the above
F) B) and D)

Question 10

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Accepted Answer

A) True 
 B)False

Question 11

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to

Accepted Answer

A)   2,500.
B)   7,500.
C)   10,000.
D)   40,000.E) A) and C)
F) None of the above

Question 12

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Accepted Answer

A)   supply of money, causing people to spend more.
B)   supply of money, causing people to spend less.
C)   demand for money, causing people to spend more.
D)   demand for money, causing people to spend less.E) A) and B)
F) B) and C)

Question 13

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

Accepted Answer

A)   velocity concept.
B)   Fisher effect.
C)   classical dichotomy.
D)   Mankiw effect.E) B) and C)
F) A) and C)

Question 14

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) A) and D)
F) A) and C)

Question 15

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

Accepted Answer

A)   28.00 percent
B)   36.25 percent
C)   43.75 percent
D)   67.50 percentE) A) and B)
F) B) and D)

Question 16

On its web site, your bank posts the interest rates it is paying on savings accounts. Those posted rates

Accepted Answer

A)   and a price index are both real variables.
B)   and a price index are both nominal variables.
C)   are real variables, and a price index is a nominal variable.
D)   are nominal variables, and a price index is a real variableE) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A)   the price level will rise.
B)   the value of money will rise.
C)   money demand will shift leftward.
D)   money demand will shift rightward.E) A) and C)
F) B) and C)

Question 18

Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.

Accepted Answer

A)   The nominal interest rate was 11 percent and the inflation rate was 5 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 5 percent.
C)   The nominal interest rate was 5 percent and the inflation rate was -1 percent.
D)   The nominal interest rate was 6 percent and the inflation rate was 1 percent.E) B) and C)
F) None of the above

Question 19

Which movie is an allegory about late 19th century monetary policy?

Accepted Answer

A)   The Wizard of Oz
B)   Mary Poppins
C)   It's a Wonderful Life
D)   Trading PlacesE) C) and D)
F) A) and C)

Question 20

The supply of money increases when

Accepted Answer

A)   the value of money increases.
B)   the interest rate increases.
C)   the Federal Reserve purchases bonds.
D)   velocity increases.E) B) and C)
F) A) and D)

Exam 30: Money Growth and Inflation

Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.

Correct Answer
verified

Which movie is an allegory about late 19th century monetary policy?

Correct Answer
verified

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by

Correct Answer
verified

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Correct Answer
verified

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

Correct Answer
verified

On its web site, your bank posts the interest rates it is paying on savings accounts. Those posted rates

Correct Answer
verified

The supply of money increases when

Correct Answer
verified

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Correct Answer
verified

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80. In 2011 tuition was $12,000 and the price index was 320. Which of the following is correct?

Correct Answer
verified

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Correct Answer
verified
double, re...
View Answer

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Correct Answer
verified

Correct Answer
verified

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Correct Answer
verified

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

Correct Answer
verified

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

Correct Answer
verified

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

Correct Answer
verified

When inflation rises, people tend to go to the bank

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Correct Answer
verified

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

Correct Answer
verified

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

Correct Answer
verified

Exam 30: Money Growth and Inflation

Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.

Correct AnswerverifiedShow Answer

Which movie is an allegory about late 19th century monetary policy?

Correct AnswerverifiedShow Answer

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by

Correct AnswerverifiedShow Answer

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

On its web site, your bank posts the interest rates it is paying on savings accounts. Those posted rates

Correct AnswerverifiedShow Answer

The supply of money increases when

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis, the money supply curve is vertical and shifts right if the Federal Reserve buys bonds.

Correct AnswerverifiedShow Answer

In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80. In 2011 tuition was $12,000 and the price index was 320. Which of the following is correct?

Correct AnswerverifiedShow Answer

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to and real GDP to .

Correct Answerverifieddouble, re...View AnswerShow Answer

One study found that unemployment is the economic term mentioned most often in U.S. newspapers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Correct AnswerverifiedShow Answer

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is

Correct AnswerverifiedShow Answer

When inflation rises, people tend to go to the bank

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

Correct AnswerverifiedShow Answer

In the 1990s, U.S. prices rose at about the same rate as in the 1970s.

Correct AnswerverifiedShow Answer

You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?

Correct AnswerverifiedShow Answer

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verified
double, re...
View Answer

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verified

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