Question 1

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 2

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A)   is 1.5 times its old value.
B)   is 3 times its old value.
C)   is 6 times its old value.
D)   is the same as its old value.E) C) and D)
F) B) and C)

Question 3

If inflation is lower than what was expected,

Accepted Answer

A)   creditors receive a lower real interest rate than they had anticipated.
B)   creditors pay a lower real interest rate than they had anticipated.
C)   debtors receive a higher real interest rate than they had anticipated.
D)   debtors pay a higher real interest rate than they had anticipated.E) B) and C)
F) A) and D)

Question 4

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) All of the above
F) A) and B)

Question 5

If P denotes the price of goods and services measured in terms of money,then

Accepted Answer

A)   1/P represents the value of money measured in terms of goods and services.
B)   P can be regarded as the "overall price level."
C)   an increase in the value of money is associated with a decrease in P.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 6

Figure 22-1 1 to MS2, A)  the equilibrium value of money decreases. B)  the equilibrium price level decreases. C)  the supply of money has decreased. D)  the demand for goods and services will decrease." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 22-1.When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)   the equilibrium value of money decreases.
B)   the equilibrium price level decreases.
C)   the supply of money has decreased.
D)   the demand for goods and services will decrease.E) B) and C)
F) A) and C)

Question 7

If the price level increased from 120 to 126,then what was the inflation rate?

Accepted Answer

A)   3 percent
B)   5 percent
C)   6 percent
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 8

If real output in an economy is 1,000 goods per year,the money supply is $300,and each dollar is spent an average of 3 times per year,then according to the quantity equation,the average price level is

Accepted Answer

A)   $0.90.
B)   $1.00.
C)   $1.11.
D)   $1.33.E) A) and B)
F) A) and C)

Question 9

Monetary neutrality implies that an increase in the quantity of money will

Accepted Answer

A)   increase employment.
B)   increase the price level.
C)   increase the incentive to save.
D)   not increase any of the above.E) A) and D)
F) C) and D)

Question 10

Suppose over some period of time the money supply tripled,velocity fell by half,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 value.E) A) and D)
F) A) and C)

Question 11

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 growth of real GDP.
B)   the inflation rate but not the growth rate of real GDP.
C)   the growth rate of real GDP,but not the inflation rate.
D)   neither the inflation rate nor the growth rate of real GDP.E) B) and D)
F) A) and B)

Question 12

If P denotes the price of goods and services measured in terms of money,then

Accepted Answer

A)   1/P represents the value of money measured in terms of goods and services.
B)   P can be interpreted as the inflation rate.
C)   the supply of money influences the value of P,but the demand for money does not.
D)   All of the above are correct.E) C) and D)
F) A) and C)

Question 13

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Accepted Answer

A) True 
 B)False

Question 14

When the money market is drawn with the value of money on the vertical axis,if the money supply rises

Accepted Answer

A)   the price level and the value of money rise.
B)   the price level rises and the value of money falls.
C)   the price level falls and the value of money rises.
D)   the price level and the value of money fall.E) None of the above
F) A) and D)

Question 15

When the money market is drawn with the value of money on the vertical axis,as the price level decreases the quantity of money

Accepted Answer

A)   demanded increases.
B)   demanded decreases.
C)   supplied increases.
D)   supplied decreases.E) B) and C)
F) A) and D)

Question 16

The story The Wizard of Oz can be interpreted as an allegory about U.S.monetary policy in the late 19th century.

Accepted Answer

A) True 
 B)False

Question 17

Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

Accepted Answer

A) True 
 B)False

Question 18

If the price level increased from 120 to 150,then what was the inflation rate?

Accepted Answer

A)   30 percent
B)   25 percent
C)   20 percent
D)   None of the above is correct.E) C) and D)
F) All of the above

Question 19

Which country is correctly matched with its 2009 inflation rate?

Accepted Answer

A)   9 percent inflation in the United States
B)   -1 percent inflation in Russia
C)   25 percent inflation in Venezuela
D)   2 percent inflation in JapanE) C) and D)
F) A) and C)

Question 20

The price level is a

Accepted Answer

A)   relative variable.
B)   dichotomous variable
C)   real variable.
D)   nominal variable.E) A) and B)
F) A) and C)

Exam 22: Money Growth and Inflation

If the price level increased from 120 to 150,then what was the inflation rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price level increased from 120 to 126,then what was the inflation rate?

Correct AnswerverifiedShow Answer

Monetary neutrality implies that an increase in the quantity of money will

Correct AnswerverifiedShow Answer

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Correct AnswerverifiedShow Answer

Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

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 real output in an economy is 1,000 goods per year,the money supply is $300,and each dollar is spent an average of 3 times per year,then according to the quantity equation,the average price level is

Correct AnswerverifiedShow Answer

If inflation is lower than what was expected,

Correct AnswerverifiedShow Answer

The story The Wizard of Oz can be interpreted as an allegory about U.S.monetary policy in the late 19th century.

Correct AnswerverifiedShow Answer

Which country is correctly matched with its 2009 inflation rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if the money supply rises

Correct AnswerverifiedShow Answer

If P denotes the price of goods and services measured in terms of money,then

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,as the price level decreases the quantity of money

Correct AnswerverifiedShow Answer

Figure 22-1 -Refer to Figure 22-1.When the money supply curve shifts from MS1 to MS2,

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The price level is a

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If P denotes the price of goods and services measured in terms of money,then

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Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Correct AnswerverifiedShow Answer

Suppose the money supply tripled,but at the same time velocity fell by half and real GDP was unchanged.According to the quantity equation the price level

Correct AnswerverifiedShow Answer

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The inflation tax refers to the fact tha...
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Figure 22-1 -Refer to Figure 22-1.When the money supply curve shifts from MS₁ to MS₂,

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