Question 1

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A)  the value of money.
B)  real interest rates.
C)  nominal interest rates.
D)  the money supply.E) B) and C)
F) All of the above

Question 2

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 3

Other things the same, a decrease in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls, so the price level rises.
B)  the rate at which money changes hands falls, so the price level falls.
C)  the rate at which money changes hands rises, so the price level rises.
D)  the rate at which money changes hands rises, so the price level falls.E) A) and B)
F) All of the above

Question 4

When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Accepted Answer

A) True 
 B)False

Question 5

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Accepted Answer

A)  the price level and velocity.
B)  the price level but not velocity.
C)  velocity but not the price level.
D)  neither the price level nor velocity.E) All of the above
F) B) and D)

Question 6

The idea that inflation by itself reduces people's purchasing power is called

Accepted Answer

A)  the inflation tax.
B)  menu costs.
C)  the inflation fallacy.
D)  shoeleather costs.E) A) and D)
F) None of the above

Question 7

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

Accepted Answer

A)  $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
B)  8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
C)  $40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
D)  8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.E) A) and B)
F) A) and C)

Question 8

Which of the following is an example of the shoeleather costs of inflation?

Accepted Answer

A)  ​Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy
B)  Beto sells stocks and earns a real capital gain of $50, but is taxed for the nominal capital gain of $75
C)  ​During Bolivia's hyperinflation, workers rushed to immediately convert their wages from pesos to black-market dollars
D)  The after-tax real interest rate is lower when inflation is higherE) A) and B)
F) A) and C)

Question 9

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent . This difference between actual and expected inflation

Accepted Answer

A)  transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected.
B)  transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected.
C)  transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected.
D)  transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.E) None of the above
F) All of the above

Question 10

Consider the economy of Burgerland, which only produces hamburgers. ​If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Accepted Answer

A)  ​2,000
B)  ​2,500
C)  ​2,750
D)  ​3,000E) B) and C)
F) All of the above

Question 11

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 1, then the equilibrium price level is 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." class="answers-bank-image d-inline" rel="preload" >
-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) A) and B)
F) A) and D)

Question 12

Serena purchased 10 shares of GLC, Inc. stock for $200 per share; one year later she sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0 to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Serena pay on her gain?

Accepted Answer

A)  $90
B)  $95
C)  $100
D)  None of the above is correct.E) B) and C)
F) All of the above

Question 13

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Accepted Answer

A)  both interest income and capital gains.
B)  interest income but not capital gains.
C)  capital gains but not interest income.
D)  neither interest income nor capital gains.E) C) and D)
F) B) and C)

Question 14

Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money supply growth would be associated with

Accepted Answer

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

Question 15

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

Accepted Answer

A)  both a nominal gain and a real gain.
B)  a nominal gain and a real loss.
C)  a nominal loss and a real gain.
D)  both a nominal loss and a real loss.E) A) and C)
F) None of the above

Question 16

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Accepted Answer

A)  Y rose, V rose
B)  Y fell, V fell
C)  Y rose, V fell
D)  Y fell, V roseE) B) and D)
F) All of the above

Question 17

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Accepted Answer

fallen, mo...

Question 18

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  real GDP.
B)  real wages.
C)  real interest rates.
D)  All of the above are correct.E) All of the above
F) A) and C)

Question 20

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

Accepted Answer

A)  the price level
B)  real GDP
C)  nominal interest rates
D)  All of the above are correct.E) A) and B)
F) None of the above

Exam 30: Money Growth and Inflation

Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money supply growth would be associated with

Correct Answer
verified

Other things the same, a decrease in velocity means that

Correct Answer
verified

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Correct Answer
verified

Consider the economy of Burgerland, which only produces hamburgers. If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Correct Answer
verified

When the consumer price index increases, the value of your money has _. According to the quantity theory of money this is caused by an increase in the _.

Correct Answer
verified
fallen, mo...
View Answer

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct Answer
verified

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

Correct Answer
verified

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent . This difference between actual and expected inflation

Correct Answer
verified

Which of the following is an example of the shoeleather costs of inflation?

Correct Answer
verified

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

Correct Answer
verified

The idea that inflation by itself reduces people's purchasing power is called

Correct Answer
verified

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

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

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified

When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Correct Answer
verified

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Correct Answer
verified

Exam 30: Money Growth and Inflation

Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money supply growth would be associated with

Correct AnswerverifiedShow Answer

Other things the same, a decrease in velocity means that

Correct AnswerverifiedShow Answer

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P?

Correct AnswerverifiedShow Answer

Consider the economy of Burgerland, which only produces hamburgers. ​If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Correct AnswerverifiedShow Answer

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Correct Answerverifiedfallen, mo...View AnswerShow Answer

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent . This difference between actual and expected inflation

Correct AnswerverifiedShow Answer

Which of the following is an example of the shoeleather costs of inflation?

Correct AnswerverifiedShow Answer

You bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. Before taxes, you experienced

Correct AnswerverifiedShow Answer

The idea that inflation by itself reduces people's purchasing power is called

Correct AnswerverifiedShow Answer

Which of the following are U.S. taxpayers allowed to adjust for inflation for the purpose of income taxes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

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

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Correct AnswerverifiedShow Answer

When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

Correct AnswerverifiedShow Answer

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Consider the economy of Burgerland, which only produces hamburgers. If the velocity of money is 25, the price of a hamburger is $5, and the quantity of money in the economy is $500, how many hamburgers did Burgerland produce?

Correct Answer
verified

When the consumer price index increases, the value of your money has _. According to the quantity theory of money this is caused by an increase in the _.

Correct Answer
verified
fallen, mo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

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

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified