Question 1

An increase in money demand would create a surplus of money at the original value of money.

Accepted Answer

A) True 
 B)False

Question 2

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

Accepted Answer

The answer of If the price level this year was...

Question 3

Economic variables whose values are measured in monetary units are called

Accepted Answer

A)   dichotomous variables.
B)   nominal variables.
C)   classical variables.
D)   real variables.E) None of the above
F) B) and D)

Question 4

Dollar prices and relative prices are both nominal variables.

Accepted Answer

A) True 
 B)False

Question 5

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Accepted Answer

A)   two percent and prices fell one percent.
B)   two percent and prices rose one percent.
C)   three percent and prices rose one percent.
D)   three percent and prices fell one percent.E) All of the above
F) A) and D)

Question 6

Fifteen years ago your parents purchased some land with the idea of selling it later to help pay your college expenses. They purchased the land for $100,000. They sold it for $180,000. During the time they held it the price level rose from 80 to 120. If your parents face a 25% tax rate, what was their real after­tax gain? Hint: What's the real value of the land in current prices?)

Accepted Answer

The answer of Fifteen years ago your parents purchased some...

Question 7

If inflation is higher than expected, then lenders receive interest payments whose real values are less than they expected.

Accepted Answer

A) True 
 B)False

Question 8

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 real interest rates.
B)   the inflation rate, but not real interest rates.
C)   real interest rates, but not the inflation rate.
D)   neither the inflation rate nor real interest rates.E) B) and C)
F) A) and C)

Question 9

When the price level rises, the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)   increases, and so the value of money rises.
B)   increases, and so the value of money falls.
C)   decreases, and so the value of money rises.
D)   decreases, and so the value of money fallsE) A) and C)
F) All of the above

Question 10

Hyperinflations are associated with governments printing money to finance expenditures.

Accepted Answer

A) True 
 B)False

Question 11

The evidence from hyperinflations indicates that money growth and inflation

Accepted Answer

A)   are positively related, which is consistent with the quantity theory of money.
B)   are positively related, which is not consistent with the quantity theory of money.
C)   are not related in a discernible fashion, which is consistent with the quantity theory of money.
D)   are not related in a discernible fashion, which is not consistent with the quantity theory of money.E) C) and D)
F) A) and B)

Question 12

If there is inflation, then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)   high relative price. Relative-price variability rises as the inflation rate rises.
B)   high relative price. Relative-price variability falls as the inflation rate rises.
C)   low relative price. Relative-price variability rises as the inflation rate rises.
D)   low relative price. Relative-price variability falls as the inflation rate rises.E) None of the above
F) A) and B)

Question 13

Banks advertise

Accepted Answer

A)   the real interest rate, which is how fast the dollar value of savings grows.
B)   the real interest rate, which is how fast the purchasing power of savings grows.
C)   the nominal interest rate, which is how fast the dollar value of savings grows.
D)   the nominal interest rate, which is how fast the purchasing power of savings grows.E) All of the above
F) A) and D)

Question 14

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Accepted Answer

He was expecting it ...

Question 15

From the early 1980's through the 1990's, the nominal interest rate

Accepted Answer

A)   fell because the Fed got inflation under control.
B)   fell because the Fed let inflation get out of control.
C)   rose because the Fed got inflation under control.
D)   rose because the Fed let inflation get out of control.E) C) and D)
F) B) and D)

Question 16

The consumer price index increases from 200 to 208. What is the inflation rate?

Accepted Answer

The answer of The consumer price index increases from 200...

Question 17

According to the quantity theory of money, a 3 percent increase in the money supply

Accepted Answer

A)   causes the price level to rise by 3 percent.
B)   causes the price level to rise by less than 3 percent.
C)   leaves the price level unchanged.
D)   causes the price level to fall by 3 percent.E) C) and D)
F) B) and C)

Question 18

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Accepted Answer

A)   M = 800, V = 16
B)   M = 150, V = 3
C)   M = 400, V = 2
D)   M = 200, V = 2E) A) and B)
F) All of the above

Question 19

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Accepted Answer

M x V = P ...

Question 20

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

Accepted Answer

A)   excess demand for money which causes the price level to rise.
B)   excess demand for money which causes the price level to fall.
C)   excess supply of money which causes the price level to rise.
D)   excess supply of money which causes the price level to fall.E) B) and C)
F) None of the above

Exam 17: Money Growth and Inflation

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

Correct Answer
verified

Economic variables whose values are measured in monetary units are called

Correct Answer
verified

If there is inflation, then a firm that has kept its price fixed for some time will have a

Correct Answer
verified

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Correct Answer
verified

According to the quantity theory of money, a 3 percent increase in the money supply

Correct Answer
verified

The evidence from hyperinflations indicates that money growth and inflation

Correct Answer
verified

When the price level rises, the number of dollars needed to buy a representative basket of goods

Correct Answer
verified

Hyperinflations are associated with governments printing money to finance expenditures.

Correct Answer
verified

The consumer price index increases from 200 to 208. What is the inflation rate?

Correct Answer
verified

The quantity equation is expressed as _. The rate at which money changes hands is known as _.

Correct Answer
verified
M x V = P ...
View Answer

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

Correct Answer
verified

From the early 1980's through the 1990's, the nominal interest rate

Correct Answer
verified

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Correct Answer
verified

Banks advertise

Correct Answer
verified

An increase in money demand would create a surplus of money at the original value of money.

Correct Answer
verified

Dollar prices and relative prices are both nominal variables.

Correct Answer
verified

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

Correct Answer
verified

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Correct Answer
verified
He was expecting it ...
View Answer

If inflation is higher than expected, then lenders receive interest payments whose real values are less than they expected.

Correct Answer
verified

Exam 17: Money Growth and Inflation

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

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in monetary units are called

Correct AnswerverifiedShow Answer

If there is inflation, then a firm that has kept its price fixed for some time will have a

Correct AnswerverifiedShow Answer

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Correct AnswerverifiedShow Answer

According to the quantity theory of money, a 3 percent increase in the money supply

Correct AnswerverifiedShow Answer

The evidence from hyperinflations indicates that money growth and inflation

Correct AnswerverifiedShow Answer

When the price level rises, the number of dollars needed to buy a representative basket of goods

Correct AnswerverifiedShow Answer

Hyperinflations are associated with governments printing money to finance expenditures.

Correct AnswerverifiedShow Answer

The consumer price index increases from 200 to 208. What is the inflation rate?

Correct AnswerverifiedShow Answer

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Correct AnswerverifiedM x V = P ...View AnswerShow Answer

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

Correct AnswerverifiedShow Answer

From the early 1980's through the 1990's, the nominal interest rate

Correct AnswerverifiedShow Answer

If P = 4 and Y = 200, then which of the following pairs of values are possible?

Correct AnswerverifiedShow Answer

Banks advertise

Correct AnswerverifiedShow Answer

An increase in money demand would create a surplus of money at the original value of money.

Correct AnswerverifiedShow Answer

Dollar prices and relative prices are both nominal variables.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

Correct AnswerverifiedShow Answer

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Correct AnswerverifiedHe was expecting it ...View AnswerShow Answer

If inflation is higher than expected, then lenders receive interest payments whose real values are less than they expected.

Correct AnswerverifiedShow 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
verified

The quantity equation is expressed as _. The rate at which money changes hands is known as _.

Correct Answer
verified
M x V = P ...
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
verified
He was expecting it ...
View Answer

Correct Answer
verified