Question 1

According to the equation of exchange, the percentage change in the price level (π) is equal to

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

Inflation that is lower than expected redistributes wealth from

Accepted Answer

A) employers to employees under nominal wage contracts. 
B) borrowers to lenders. 
C) lenders to borrowers. 
D) the federal government to taxpayers. 
A) employers to employees under nominal wage contracts. 
B) borrowers to lenders. 
C) lenders to borrowers. 
D) the federal government to taxpayers.

Question 3

Sustained inflation will be caused by a sustained growth in the nominal money supply at a rate faster than the growth rate of velocity and the growth rate of output according to

Accepted Answer

A) new Keynesian economists but not according to new classical economists. 
B) new classical economists but not according to new Keynesian economists. 
C) both new classical and new Keynesian economists. 
D) neither new classical nor new Keynesian economists. 
A) new Keynesian economists but not according to new classical economists. 
B) new classical economists but not according to new Keynesian economists. 
C) both new classical and new Keynesian economists. 
D) neither new classical nor new Keynesian economists.

Question 4

Which of the following statements is correct?

Accepted Answer

A) Both new Keynesian and new classical economists believe money is neutral in the short run. 
B) New Keynesian economists believe money is neutral in the short run, but new classical economists do not. 
C) Both new Keynesian and new classical economists believe money is neutral in the long run. 
D) New classical economists believe money is neutral in the long run, but new Keynesian economists do not. 
A) Both new Keynesian and new classical economists believe money is neutral in the short run. 
B) New Keynesian economists believe money is neutral in the short run, but new classical economists do not. 
C) Both new Keynesian and new classical economists believe money is neutral in the long run. 
D) New classical economists believe money is neutral in the long run, but new Keynesian economists do not.

Question 5

Menu costs of inflation are costs arising from

Accepted Answer

A) the failure to fully index the tax system for inflation. 
B) attempts by households and firms to avoid paying an inflation tax on money balances. 
C) the need for firms to change prices during times of inflation. 
D) high nominal interest rates. 
A) the failure to fully index the tax system for inflation. 
B) attempts by households and firms to avoid paying an inflation tax on money balances. 
C) the need for firms to change prices during times of inflation. 
D) high nominal interest rates.

Question 6

Why has the Fed made low inflation a major goal in recent decades?

Accepted Answer

A) Because high inflation rates reduce the tax revenues collected by the federal government 
B) Because they wish to avoid the rapid and sustained price increases that occurred during the 1970s 
C) Because Congress passed a law in 1981 mandating the Fed to reduce the inflation rate to 2% 
D) Because high inflation rates increase the value of the dollar and make U.S. goods less competitive in foreign markets 
A) Because high inflation rates reduce the tax revenues collected by the federal government 
B) Because they wish to avoid the rapid and sustained price increases that occurred during the 1970s 
C) Because Congress passed a law in 1981 mandating the Fed to reduce the inflation rate to 2% 
D) Because high inflation rates increase the value of the dollar and make U.S. goods less competitive in foreign markets

Question 7

Which of the following statements is correct?

Accepted Answer

A) Throughout U.S. history prices have fallen in more years than they have risen. 
B) Prices have risen every year in the United States since 1800. 
C) Prices have fallen in the majority of years since 1939. 
D) Prices fell every year in the 1980s. 
A) Throughout U.S. history prices have fallen in more years than they have risen. 
B) Prices have risen every year in the United States since 1800. 
C) Prices have fallen in the majority of years since 1939. 
D) Prices fell every year in the 1980s.

Question 8

Long-term inflation is principally

Accepted Answer

A) the result of chronic federal budget deficits. 
B) the result of the slowdown in the growth rate of aggregate supply since 1973. 
C) caused by excess wage demands by unionized workers. 
D) a monetary phenomenon. 
A) the result of chronic federal budget deficits. 
B) the result of the slowdown in the growth rate of aggregate supply since 1973. 
C) caused by excess wage demands by unionized workers. 
D) a monetary phenomenon.

Question 9

All of the following nations suffered from very high inflation in the 1970s and 1980s EXCEPT

Accepted Answer

A) Chile. 
B) Yugoslavia. 
C) Brazil. 
D) Zaire. 
A) Chile. 
B) Yugoslavia. 
C) Brazil. 
D) Zaire.

Question 10

Evaluate the following assertion: "The oil price shock of 1974 was responsible for the high rates of inflation the United States experienced throughout the remainder of the 1970s."

Accepted Answer

This assertion is incorrect. A

Question 11

According to new Keynesian economists, sustained expected increases in the nominal money supply will lead to

Accepted Answer

A) increases in output in the short run and sustained increases in prices in the long run. 
B) sustained increases in prices, with no short-run increases in output. 
C) short-run increases in prices and output, with a stable price level and no increases in output in the long run. 
D) sustained increases in both prices and output in the long run. 
A) increases in output in the short run and sustained increases in prices in the long run. 
B) sustained increases in prices, with no short-run increases in output. 
C) short-run increases in prices and output, with a stable price level and no increases in output in the long run. 
D) sustained increases in both prices and output in the long run.

Question 12

The key reason that expected inflation can distort financial decisions is that

Accepted Answer

A) lenders pay taxes on nominal rather than real returns. 
B) lenders have an easier time calculating expected inflation than do borrowers. 
C) expected inflation reduces the real value of the national debt. 
D) expected inflation results in substantial menu costs. 
A) lenders pay taxes on nominal rather than real returns. 
B) lenders have an easier time calculating expected inflation than do borrowers. 
C) expected inflation reduces the real value of the national debt. 
D) expected inflation results in substantial menu costs.

According to the equation of exchange, the percentage change in the price level (π) is equal to

Inflation that is lower than expected redistributes wealth from

Sustained inflation will be caused by a sustained growth in the nominal money supply at a rate faster than the growth rate of velocity and the growth rate of output according to

Which of the following statements is correct?

Menu costs of inflation are costs arising from

Why has the Fed made low inflation a major goal in recent decades?

Which of the following statements is correct?

Long-term inflation is principally

All of the following nations suffered from very high inflation in the 1970s and 1980s EXCEPT

Evaluate the following assertion: "The oil price shock of 1974 was responsible for the high rates of inflation the United States experienced throughout the remainder of the 1970s."

According to new Keynesian economists, sustained expected increases in the nominal money supply will lead to

The key reason that expected inflation can distort financial decisions is that

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Filters

Exam 28: Inflation: Causes and Consequences

According to the equation of exchange, the percentage change in the price level (π) is equal to

Inflation that is lower than expected redistributes wealth from

Sustained inflation will be caused by a sustained growth in the nominal money supply at a rate faster than the growth rate of velocity and the growth rate of output according to

Which of the following statements is correct?

Menu costs of inflation are costs arising from

Why has the Fed made low inflation a major goal in recent decades?

Which of the following statements is correct?

Long-term inflation is principally

All of the following nations suffered from very high inflation in the 1970s and 1980s EXCEPT

Evaluate the following assertion: "The oil price shock of 1974 was responsible for the high rates of inflation the United States experienced throughout the remainder of the 1970s."

According to new Keynesian economists, sustained expected increases in the nominal money supply will lead to

The key reason that expected inflation can distort financial decisions is that

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Filters