Question 1

Economists before the 1940s were most likely to call a rise in asset prices an inflation as long as it is accompanied by an increase in:

Accepted Answer

A) the money supply. 
B) GDP. 
C) goods inflation. 
D) a price index. 
A) the money supply. 
B) GDP. 
C) goods inflation. 
D) a price index.

Question 2

The long-run Phillips curve shifts to the left or the right as expectations of inflation change.

Accepted Answer

A) True 
 B)False

Question 3

As the economy moves to the right of the long-run Phillips curve inflationary:

Accepted Answer

A) pressures build. 
B) pressures subside. 
C) pressures remain constant. 
D) expectations rise. 
A) pressures build. 
B) pressures subside. 
C) pressures remain constant. 
D) expectations rise.

Question 4

Inflation has both benefits and costs.

Accepted Answer

A) True 
 B)False

Question 5

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 1 percent and productivity increases 2 percent, one would predict inflation to be:

Accepted Answer

A) -1 percent 
B) 0 percent 
C) 1.5 percent. 
D) 3 percent. 
A) -1 percent 
B) 0 percent 
C) 1.5 percent. 
D) 3 percent.

Question 6

Inflationary expectations are important because widespread changes in inflationary expectations affect:

Accepted Answer

A) the distribution of income. 
B) relative prices. 
C) actual inflation. 
D) Okun's rule of thumb. 
A) the distribution of income. 
B) relative prices. 
C) actual inflation. 
D) Okun's rule of thumb.

Question 7

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 5 percent and productivity increases 3 percent, one would predict inflation to be:

Accepted Answer

A) -1 percent 
B) 0 percent 
C) 1 percent. 
D) 2 percent. 
A) -1 percent 
B) 0 percent 
C) 1 percent. 
D) 2 percent.

Question 8

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 2 percent and productivity increases 1 percent, one would predict inflation to be:

Accepted Answer

A) 0 percent 
B) 1 percent 
C) 1.5 percent. 
D) 3 percent. 
A) 0 percent 
B) 1 percent 
C) 1.5 percent. 
D) 3 percent.

Question 9

If the U.S.money supply increases from $7.6 trillion to $8.3 trillion.If there is zero real economic growth, and velocity stays constant, then according to the quantity theory of money, the U.S.inflation rate during this period would be:

Accepted Answer

A) 3 percent. 
B) 6 percent. 
C) 9 percent. 
D) 12 percent. 
A) 3 percent. 
B) 6 percent. 
C) 9 percent. 
D) 12 percent.

Question 10

According to the quantity theory of money, inflation is attributable to increases in:

Accepted Answer

A) velocity. 
B) real GDP. 
C) velocity in excess of increases in real GDP. 
D) the money supply in excess of increases in real GDP. 
A) velocity. 
B) real GDP. 
C) velocity in excess of increases in real GDP. 
D) the money supply in excess of increases in real GDP.

Question 11

According to institutionally focused economists,

Accepted Answer

A) the direction of causation goes from MV to PQ. 
B) asset inflation is a phenomenon that cannot occur. 
C) inflation is double the rise in money supply. 
D) price-setting conventions by institutions are the source of inflation. 
A) the direction of causation goes from MV to PQ. 
B) asset inflation is a phenomenon that cannot occur. 
C) inflation is double the rise in money supply. 
D) price-setting conventions by institutions are the source of inflation.

Question 12

With 6% inflation and a 1% nominal interest rate the real interest rate is

Accepted Answer

A) is 7% 
B) 1% 
C) -5% 
D) 5% 
A) is 7% 
B) 1% 
C) -5% 
D) 5%

Question 13

Refer to the graph shown.   Suppose an economy begins at point B but then adopts an expansionary monetary policy.In the short run, this policy would most likely:

Accepted Answer

A) reduce inflation to 3 percent and raise unemployment to 7.5 percent. 
B) reduce inflation to 3 percent and reduce unemployment to 4 percent. 
C) raise inflation to 9 percent and raise unemployment to 7.5 percent. 
D) raise inflation to 9 percent and reduce unemployment to 4 percent. 
A) reduce inflation to 3 percent and raise unemployment to 7.5 percent. 
B) reduce inflation to 3 percent and reduce unemployment to 4 percent. 
C) raise inflation to 9 percent and raise unemployment to 7.5 percent. 
D) raise inflation to 9 percent and reduce unemployment to 4 percent.

Question 14

Refer to the graph shown.   Which of the graphs correctly depicts the short-run Phillips curve with globalization?

Accepted Answer

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

Question 15

Which of the following remains constant along the short-run Phillips curve?

Accepted Answer

A) Unemployment 
B) Inflationary expectations 
C) Inflation 
D) Output 
A) Unemployment 
B) Inflationary expectations 
C) Inflation 
D) Output

Question 16

Refer to the graph shown.   Which of the graphs correctly depicts the short-run Phillips curve in the standard model without trade?

Accepted Answer

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

Question 17

According to institutionally focused economists,

Accepted Answer

A) the direction of causation goes from MV to PQ. 
B) the direction of causation goes from PQ to MV. 
C) there is no relationship between PQ and MV because V is constant. 
D) there is no relationship between PQ and MV because Q isn't constant. 
A) the direction of causation goes from MV to PQ. 
B) the direction of causation goes from PQ to MV. 
C) there is no relationship between PQ and MV because V is constant. 
D) there is no relationship between PQ and MV because Q isn't constant.

Question 18

If expected inflation increases, the same level of unemployment will be associated with:

Accepted Answer

A) a higher rate of inflation. 
B) a lower rate of inflation. 
C) the same rate of inflation. 
D) no inflation. 
A) a higher rate of inflation. 
B) a lower rate of inflation. 
C) the same rate of inflation. 
D) no inflation.

Question 19

Suppose velocity is constant but real GDP is not independent of the money supply.If this is the case, a 10 percent increase in the money supply will:

Accepted Answer

A) raise inflation by 10 percent. 
B) raise inflation by less than 10 percent. 
C) raise inflation by more than 10 percent. 
D) have an unpredictable effect on inflation. 
A) raise inflation by 10 percent. 
B) raise inflation by less than 10 percent. 
C) raise inflation by more than 10 percent. 
D) have an unpredictable effect on inflation.

Question 20

One reason goods inflation is preferred by policymakers is that it

Accepted Answer

A) keeps the economy away from asset inflation 
B) keeps the economy away from asset deflation 
C) makes people richer 
D) makes people see the importance of monetary policy 
A) keeps the economy away from asset inflation 
B) keeps the economy away from asset deflation 
C) makes people richer 
D) makes people see the importance of monetary policy

Exam 34: Inflation, Deflation, and Macro Policy

Economists before the 1940s were most likely to call a rise in asset prices an inflation as long as it is accompanied by an increase in:

The long-run Phillips curve shifts to the left or the right as expectations of inflation change.

As the economy moves to the right of the long-run Phillips curve inflationary:

Inflation has both benefits and costs.

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 1 percent and productivity increases 2 percent, one would predict inflation to be:

Inflationary expectations are important because widespread changes in inflationary expectations affect:

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 5 percent and productivity increases 3 percent, one would predict inflation to be:

Given the basic rule of thumb for the relationship among inflation, productivity and nominal wage increases, if wages rise by 2 percent and productivity increases 1 percent, one would predict inflation to be:

If the U.S.money supply increases from $7.6 trillion to $8.3 trillion.If there is zero real economic growth, and velocity stays constant, then according to the quantity theory of money, the U.S.inflation rate during this period would be:

According to the quantity theory of money, inflation is attributable to increases in:

According to institutionally focused economists,

With 6% inflation and a 1% nominal interest rate the real interest rate is

Refer to the graph shown. Suppose an economy begins at point B but then adopts an expansionary monetary policy.In the short run, this policy would most likely:

Refer to the graph shown. Which of the graphs correctly depicts the short-run Phillips curve with globalization?

Which of the following remains constant along the short-run Phillips curve?

Refer to the graph shown. Which of the graphs correctly depicts the short-run Phillips curve in the standard model without trade?

According to institutionally focused economists,

If expected inflation increases, the same level of unemployment will be associated with:

Suppose velocity is constant but real GDP is not independent of the money supply.If this is the case, a 10 percent increase in the money supply will:

One reason goods inflation is preferred by policymakers is that it

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters