Question 1

The quantity theory of money implies that the money supply times the velocity of money equals:

Accepted Answer

A)  real GDP. 
B)  the quantity of goods and services. 
C)  the price level. 
D)  nominal GDP. 
A)  real GDP. 
B)  the quantity of goods and services. 
C)  the price level. 
D)  nominal GDP.

Question 2

The "quantity theory of money" describes the relationship between:

Accepted Answer

A)  prices, employment, money supply, and production. 
B)  the velocity of money, money supply, real output, and prices. 
C)  GDP, money supply, consumption, and savings. 
D)  the money supply and real GDP. 
A)  prices, employment, money supply, and production. 
B)  the velocity of money, money supply, real output, and prices. 
C)  GDP, money supply, consumption, and savings. 
D)  the money supply and real GDP.

Question 3

The average number of times a dollar is spent on final goods and services during a year is the:

Accepted Answer

A)  velocity of money. 
B)  money supply. 
C)  consumption rate. 
D)  quantity theory of money. 
A)  velocity of money. 
B)  money supply. 
C)  consumption rate. 
D)  quantity theory of money.

Question 4

The bundle of goods used to calculate the consumer price index is always changing.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

Accepted Answer

A)  The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers. 
B)  The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods. 
C)  The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy. 
D)  The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy. 
A)  The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers. 
B)  The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods. 
C)  The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy. 
D)  The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy.

Question 6

The quantity theory states that money is neutral:

Accepted Answer

A)  in both the short run and the long run. 
B)  only in the short run. 
C)  only in the long run. 
D)  neither in the short run nor in the long run. 
A)  in both the short run and the long run. 
B)  only in the short run. 
C)  only in the long run. 
D)  neither in the short run nor in the long run.

Question 7

According to the quantity theory of money, a change in the money supply affects:

Accepted Answer

A)  real GDP in the short run but not in the long run. 
B)  real GDP in the long run but not in the short run. 
C)  nominal GDP in the short run but not in the long run. 
D)  nominal GDP in the long run but not in the short run. 
A)  real GDP in the short run but not in the long run. 
B)  real GDP in the long run but not in the short run. 
C)  nominal GDP in the short run but not in the long run. 
D)  nominal GDP in the long run but not in the short run.

Question 8

An investment of $1,000 in the bank at an annual interest rate of 4% at the same time that prices rise by 2.5% generates a real return of:

Accepted Answer

A)  1.5%. 
B)  2.5%. 
C)  4%. 
D)  6.5%. 
A)  1.5%. 
B)  2.5%. 
C)  4%. 
D)  6.5%.

Question 9

Money illusion occurs when people:

Accepted Answer

A)  become irrational about money use. 
B)  become rationally ignorant about money. 
C)  mistake changes in prices for changes in quality. 
D)  mistake changes in nominal prices for changes in real prices. 
A)  become irrational about money use. 
B)  become rationally ignorant about money. 
C)  mistake changes in prices for changes in quality. 
D)  mistake changes in nominal prices for changes in real prices.

The quantity theory of money implies that the money supply times the velocity of money equals:

The "quantity theory of money" describes the relationship between:

The average number of times a dollar is spent on final goods and services during a year is the:

The bundle of goods used to calculate the consumer price index is always changing.

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

The quantity theory states that money is neutral:

According to the quantity theory of money, a change in the money supply affects:

An investment of $1,000 in the bank at an annual interest rate of 4% at the same time that prices rise by 2.5% generates a real return of:

Money illusion occurs when people:

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 12: Inflation and the Quantity Theory of Money

The quantity theory of money implies that the money supply times the velocity of money equals:

The "quantity theory of money" describes the relationship between:

The average number of times a dollar is spent on final goods and services during a year is the:

The bundle of goods used to calculate the consumer price index is always changing.

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

The quantity theory states that money is neutral:

According to the quantity theory of money, a change in the money supply affects:

An investment of $1,000 in the bank at an annual interest rate of 4% at the same time that prices rise by 2.5% generates a real return of:

Money illusion occurs when people:

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters