Question 1

Most economists believe that _______ is a purely _______ phenomenon.

Accepted Answer

A)  deflation; fiscal 
B)  unemployment; monetary 
C)  hyperinflation; monetary 
D)  inflation; fiscal 
A)  deflation; fiscal 
B)  unemployment; monetary 
C)  hyperinflation; monetary 
D)  inflation; fiscal

Question 2

If a country is currently engaged in a war with another country, it will experience hyperinflation.

Accepted Answer

A) True 
 B)False

Question 3

People are said to have rational expectations if they:

Accepted Answer

A)  assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years. 
B)  use all available information in forming their expectations. 
C)  merely guess at the inflation rate. 
D)  assume that this year's inflation rate will be the same as last year's inflation rate. 
A)  assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years. 
B)  use all available information in forming their expectations. 
C)  merely guess at the inflation rate. 
D)  assume that this year's inflation rate will be the same as last year's inflation rate.

Question 4

Is the quantity equation a short- run concept or a long- run concept? Explain.

Accepted Answer

Long- run. The quantity equation is a lo

Question 5

Jim's nominal wage increased by 1%, and the prices of goods that Jim buys increased by 4%. Jim's real wage has:

Accepted Answer

A)  remained constant. 
B)  increased. 
C)  decreased. 
D)  changed by 5%, but the direction of the change is ambiguous. 
A)  remained constant. 
B)  increased. 
C)  decreased. 
D)  changed by 5%, but the direction of the change is ambiguous.

Question 6

If the quantity equation holds, then a country operating under a gold standard will experience _______ when its residents discover large gold deposits underground.

Accepted Answer

A)  deflation 
B)  disinflation 
C)  inflation 
D)  All of the above are correct. 
A)  deflation 
B)  disinflation 
C)  inflation 
D)  All of the above are correct.

Question 7

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions:
-According to the application, William Dickens estimated that the natural rate of unemployment since the 1990s has been:

Accepted Answer

A)  4 percent. 
B)  6 percent. 
C)  7 percent. 
D)  5 percent. 
A)  4 percent. 
B)  6 percent. 
C)  7 percent. 
D)  5 percent.

Question 8

When people form expectations about future inflation based on last period's inflation rate, it is said that expectations are formed:

Accepted Answer

A)  analytically. 
B)  using the rule of Law. 
C)  using a rule of thumb. 
D)  rationally. 
A)  analytically. 
B)  using the rule of Law. 
C)  using a rule of thumb. 
D)  rationally.

Question 9

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions:
-An 8 million percent annual increase in the price level implies that if the price of a basket of goods in June 2007 was $100, then in June 2008, the price of the same basket of goods would be:

Accepted Answer

A)  $800 million. 
B)  $100. 
C)  $80,000. 
D)  $8 million. 
A)  $800 million. 
B)  $100. 
C)  $80,000. 
D)  $8 million.

Question 10

Explain how expectations can be self- fulfilling in contributing to inflation.

Accepted Answer

If inflation is expected to be high in t

Question 11

When Bob incorrectly believed that his real wage went up when his nominal wages increased because he failed to factor in the effects of inflation, then economists say that he is a victim of:

Accepted Answer

A)  the discouraged worker effect. 
B)  inflation injustice. 
C)  unemployment. 
D)  money illusion. 
A)  the discouraged worker effect. 
B)  inflation injustice. 
C)  unemployment. 
D)  money illusion.

Question 12

According to the growth version of the quantity equation, a 4% increase in the money supply (holding velocity constant) causes a 2% increase in prices only if:

Accepted Answer

A)  nominal GDP increases by 2 percent. 
B)  real GDP increases by 2 percent. 
C)  real GDP decreases by 2 percent. 
D)  nominal GDP decreases by 2 percent. 
A)  nominal GDP increases by 2 percent. 
B)  real GDP increases by 2 percent. 
C)  real GDP decreases by 2 percent. 
D)  nominal GDP decreases by 2 percent.

Question 13

Suppose that the government collects $500 in taxes and borrows $1000 from the public. If the government prints $200 in new money to finance its budget deficit, how much is the government spending?

Accepted Answer

A)  $1200 
B)  $1500 
C)  $700 
D)  $1700 
A)  $1200 
B)  $1500 
C)  $700 
D)  $1700

Question 14

If individuals form rational expectations, an announced policy of reducing the rate of growth in the money supply that is credible will result in:

Accepted Answer

A)  increased expectations of inflation. 
B)  unchanged expectations of inflation. 
C)  lower expectations of inflation. 
D)  possibly any of the above depending on the current inflation rate. 
A)  increased expectations of inflation. 
B)  unchanged expectations of inflation. 
C)  lower expectations of inflation. 
D)  possibly any of the above depending on the current inflation rate.

Question 15

Explain what is meant by the velocity of money.

Accepted Answer

The velocity of money represen

Question 16

The United States relies heavily on seignorage to finance its government expenditures.

Accepted Answer

A) True 
 B)False

Question 17

If the expectations Phillips curve holds true, then the unemployment rate varies with the:

Accepted Answer

A)  unanticipated inflation rate. 
B)  long- run growth rate of real GDP. 
C)  anticipated inflation rate. 
D)  money supply. 
A)  unanticipated inflation rate. 
B)  long- run growth rate of real GDP. 
C)  anticipated inflation rate. 
D)  money supply.

Question 18

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions:
-According to the application, which of the following contributed to the hyperinflation in Zimbabwe:

Accepted Answer

A)  the bribing of soldiers and supporters using newly minted currency. 
B)  Mugabe's policies to intervene militarily in African conflicts. 
C)  decline in tax revenues and export revenues. 
D)  All of the above contributed to the hyperinflation. 
A)  the bribing of soldiers and supporters using newly minted currency. 
B)  Mugabe's policies to intervene militarily in African conflicts. 
C)  decline in tax revenues and export revenues. 
D)  All of the above contributed to the hyperinflation.

Question 19

Which of the following is a factor that economists have identified that can shift the natural rate of unemployment?

Accepted Answer

A)  institutional changes 
B)  changes in demographics 
C)  changes in labor productivity 
D)  All of the above are correct. 
A)  institutional changes 
B)  changes in demographics 
C)  changes in labor productivity 
D)  All of the above are correct.

Question 20

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions:
-According to the application, William Dickens estimated that the natural rate of unemployment in 1970 was:

Accepted Answer

A)  6 percent. 
B)  4 percent. 
C)  7 percent. 
D)  5 percent. 
A)  6 percent. 
B)  4 percent. 
C)  7 percent. 
D)  5 percent.

Most economists believe that _ is a purely _ phenomenon.

If a country is currently engaged in a war with another country, it will experience hyperinflation.

People are said to have rational expectations if they:

Is the quantity equation a short- run concept or a long- run concept? Explain.

Jim's nominal wage increased by 1%, and the prices of goods that Jim buys increased by 4%. Jim's real wage has:

If the quantity equation holds, then a country operating under a gold standard will experience _______ when its residents discover large gold deposits underground.

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions: -According to the application, William Dickens estimated that the natural rate of unemployment since the 1990s has been:

When people form expectations about future inflation based on last period's inflation rate, it is said that expectations are formed:

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions: -An 8 million percent annual increase in the price level implies that if the price of a basket of goods in June 2007 was $100, then in June 2008, the price of the same basket of goods would be:

Explain how expectations can be self- fulfilling in contributing to inflation.

When Bob incorrectly believed that his real wage went up when his nominal wages increased because he failed to factor in the effects of inflation, then economists say that he is a victim of:

According to the growth version of the quantity equation, a 4% increase in the money supply (holding velocity constant) causes a 2% increase in prices only if:

Suppose that the government collects $500 in taxes and borrows $1000 from the public. If the government prints $200 in new money to finance its budget deficit, how much is the government spending?

If individuals form rational expectations, an announced policy of reducing the rate of growth in the money supply that is credible will result in:

Explain what is meant by the velocity of money.

The United States relies heavily on seignorage to finance its government expenditures.

If the expectations Phillips curve holds true, then the unemployment rate varies with the:

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions: -According to the application, which of the following contributed to the hyperinflation in Zimbabwe:

Which of the following is a factor that economists have identified that can shift the natural rate of unemployment?

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions: -According to the application, William Dickens estimated that the natural rate of unemployment in 1970 was:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 16: The Dynamics of Inflation and Unemployment

Most economists believe that _______ is a purely _______ phenomenon.

If a country is currently engaged in a war with another country, it will experience hyperinflation.

People are said to have rational expectations if they:

Is the quantity equation a short- run concept or a long- run concept? Explain.

Jim's nominal wage increased by 1%, and the prices of goods that Jim buys increased by 4%. Jim's real wage has:

If the quantity equation holds, then a country operating under a gold standard will experience _______ when its residents discover large gold deposits underground.

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions: -According to the application, William Dickens estimated that the natural rate of unemployment since the 1990s has been:

When people form expectations about future inflation based on last period's inflation rate, it is said that expectations are formed:

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions: -An 8 million percent annual increase in the price level implies that if the price of a basket of goods in June 2007 was $100, then in June 2008, the price of the same basket of goods would be:

Explain how expectations can be self- fulfilling in contributing to inflation.

When Bob incorrectly believed that his real wage went up when his nominal wages increased because he failed to factor in the effects of inflation, then economists say that he is a victim of:

According to the growth version of the quantity equation, a 4% increase in the money supply (holding velocity constant) causes a 2% increase in prices only if:

Suppose that the government collects $500 in taxes and borrows $1000 from the public. If the government prints $200 in new money to finance its budget deficit, how much is the government spending?

If individuals form rational expectations, an announced policy of reducing the rate of growth in the money supply that is credible will result in:

Explain what is meant by the velocity of money.

The United States relies heavily on seignorage to finance its government expenditures.

If the expectations Phillips curve holds true, then the unemployment rate varies with the:

Recall Application 3, "Hyperinflation in Zimbabwe," to answer the following questions: -According to the application, which of the following contributed to the hyperinflation in Zimbabwe:

Which of the following is a factor that economists have identified that can shift the natural rate of unemployment?

Recall Application 1, "Shifts in the Natural Rate of Unemployment" to answer the following questions: -According to the application, William Dickens estimated that the natural rate of unemployment in 1970 was:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Most economists believe that _ is a purely _ phenomenon.