Question 1

Velocity is computed as

Accepted Answer

A)  (P  ×	imes×  Y) /M.
B)  (P  ×	imes×  M) /Y.
C)  (Y  ×	imes×  M) /P.
D)  (Y  ×	imes×  M) /V. E) A) and B)
F) None of the above A

Question 2

According to the principle of monetary neutrality,a decrease in the money supply will not change

Accepted Answer

A)  nominal GDP.
B)  the price level.
C)  unemployment.
D)  All of the above are correct.E) B) and C)
F) All of the above

Question 3

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Accepted Answer

A)  decrease,which encourages savings.
B)  decrease,which discourages savings.
C)  increase,which encourages savings.
D)  increase,which discourages savings.E) A) and B)
F) A) and C)

Question 4

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) C) and D)
F) B) and C)

Question 5

According to the quantity equation,the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)  either a rise in output or a rise in the rate at which money changes hands.
B)  either a rise in output or a fall in the rate at which money changes hands.
C)  either a fall in output or a rise in the rate at which money changes hands.
D)  either a fall in output or a fall in the rate at which money changes hands.E) All of the above
F) A) and B)

Question 6

If velocity and output were nearly constant,then

Accepted Answer

A)  the inflation rate would be much higher than the money supply growth rate.
B)  the inflation rate would be about the same as the money supply growth rate.
C)  the inflation rate would be much lower than the money supply growth rate.
D)  any of the above would be possible.E) A) and D)
F) B) and C) B

Question 7

Which of the following is accurate?

Accepted Answer

A)  Monetary policy is neutral in both the short run and the long run.
B)  Though monetary policy is neutral in the long run,it may have effects on real variables in the short run.
C)  Monetary policy has profound effects on real variables in both the short run and the long run.
D)  Monetary policy has profound effects on real variables in the long run,but is neutral in the short run.E) A) and D)
F) A) and C)

Question 8

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Accepted Answer

A)  both the classical dichotomy and the quantity theory of money.
B)  the classical dichotomy,but not the quantity theory of money.
C)  the quantity theory of money,but not the classical dichotomy.
D)  neither the classical dichotomy nor the quantity theory of money.E) A) and B)
F) None of the above

Question 9

If money demand shifts right,the price level falls.

Accepted Answer

A) True 
 B)False

Question 10

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 B)
F) C) and D)

Question 11

The classical theory of inflation

Accepted Answer

A)  is also known as the quantity theory of money.
B)  was developed by some of the earliest economic thinkers.
C)  is used by most modern economists to explain the long-run determinants of the inflation rate.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 12

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Accepted Answer

A) True 
 B)False

Question 13

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Accepted Answer

When the money supply increases,there is...

Question 14

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 th...

Question 15

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Accepted Answer

A)  your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased.
B)  your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased.
C)  your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased.
D)  your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased.E) C) and D)
F) All of the above

Question 16

Higher inflation

Accepted Answer

A)  causes firms to change prices less frequently and makes relative prices less variable.
B)  causes firms to change prices less frequently and makes relative prices more variable.
C)  causes firms to change prices more frequently and makes relative prices less variable.
D)  causes firms to change prices more frequently and makes relative prices more variable.E) B) and C)
F) C) and D)

Question 17

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

Accepted Answer

When the Fed sells government bonds,the money supply decreases.This shifts the money supply curve from MS₂ to MS₁ and makes the value of money increase.Since money is worth more,it takes less to buy goods with it,which means the price level falls.

Question 18

High and unexpected inflation has a greater cost

Accepted Answer

A)  for those who borrow than for those who save.
B)  for those who hold a little money than for those who hold a lot of money.
C)  for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation.
D)  All of the above are correct.E) A) and C)
F) None of the above

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

Even though monetary policy is neutral in the short run,it may have profound real effects in the long run.

Accepted Answer

A) True 
 B)False

Exam 31: Money Growth and Inflation

Velocity is computed as

Correct Answer
verified
A

According to the principle of monetary neutrality,a decrease in the money supply will not change

Correct Answer
verified

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Correct Answer
verified

Inflation can be measured by the

Correct Answer
verified

According to the quantity equation,the price level would change less than proportionately with a rise in the money supply if there were also

Correct Answer
verified

If velocity and output were nearly constant,then

Correct Answer
verified
B

Which of the following is accurate?

Correct Answer
verified

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Correct Answer
verified

If money demand shifts right,the price level falls.

Correct Answer
verified

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

Correct Answer
verified

The classical theory of inflation

Correct Answer
verified

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct Answer
verified

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Correct Answer
verified
When the money supply increases,there is...
View 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 Answer
verified
Typically,the government in countries th...
View Answer

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Correct Answer
verified

Higher inflation

Correct Answer
verified

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

High and unexpected inflation has a greater cost

Correct Answer
verified

The source of all four classic hyperinflations was high rates of money growth.

Correct Answer
verified

Even though monetary policy is neutral in the short run,it may have profound real effects in the long run.

Correct Answer
verified

Exam 31: Money Growth and Inflation

Velocity is computed as

Correct AnswerverifiedA

According to the principle of monetary neutrality,a decrease in the money supply will not change

Correct AnswerverifiedShow Answer

For a given real interest rate,an increase in inflation makes the after-tax real interest rate

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

According to the quantity equation,the price level would change less than proportionately with a rise in the money supply if there were also

Correct AnswerverifiedShow Answer

If velocity and output were nearly constant,then

Correct AnswerverifiedB

Which of the following is accurate?

Correct AnswerverifiedShow Answer

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Correct AnswerverifiedShow Answer

If money demand shifts right,the price level falls.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The classical theory of inflation

Correct AnswerverifiedShow Answer

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct AnswerverifiedShow Answer

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Correct AnswerverifiedWhen the money supply increases,there is...View AnswerShow 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 th...View AnswerShow Answer

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Correct AnswerverifiedShow Answer

Higher inflation

Correct AnswerverifiedShow Answer

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

High and unexpected inflation has a greater cost

Correct AnswerverifiedShow Answer

The source of all four classic hyperinflations was high rates of money growth.

Correct AnswerverifiedShow Answer

Even though monetary policy is neutral in the short run,it may have profound real effects in the long run.

Correct AnswerverifiedShow Answer

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A

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B

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When the money supply increases,there is...
View Answer

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Typically,the government in countries th...
View Answer

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