Question 1

If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is

Accepted Answer

A) 3 per cent. 
B) 6 per cent. 
C) 9 per cent. 
D) 18 per cent. 
E) None of these answers. 
A) 3 per cent. 
B) 6 per cent. 
C) 9 per cent. 
D) 18 per cent. 
E) None of these answers. A

Question 2

If actual inflation turns out to be greater than people had expected, then

Accepted Answer

A) no redistribution occurred. 
B) wealth was redistributed to lenders from borrowers. 
C) the real interest rate is unaffected. 
D) wealth was redistributed to borrowers from lenders. 
A) no redistribution occurred. 
B) wealth was redistributed to lenders from borrowers. 
C) the real interest rate is unaffected. 
D) wealth was redistributed to borrowers from lenders. D

Question 3

If money is neutral,

Accepted Answer

A) an increase in the money supply does nothing. 
B) a change in the money supply only affects real variables such as real output. 
C) a change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output. 
D) a change in the money supply only affects nominal variables such as prices and wages. 
E) the money supply cannot be changed because it is tied to a commodity such as gold. 
A) an increase in the money supply does nothing. 
B) a change in the money supply only affects real variables such as real output. 
C) a change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output. 
D) a change in the money supply only affects nominal variables such as prices and wages. 
E) the money supply cannot be changed because it is tied to a commodity such as gold. D

Question 4

If the price level doubles,

Accepted Answer

A) the quantity demanded of money falls by half. 
B) the value of money is cut by half. 
C) nominal income is unaffected. 
D) None of these answers. 
E) the money supply has halved. 
A) the quantity demanded of money falls by half. 
B) the value of money is cut by half. 
C) nominal income is unaffected. 
D) None of these answers. 
E) the money supply has halved.

Question 5

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods.How can this be?

Accepted Answer

Inflation has raised the general price l

Question 6

The shoeleather costs of inflation should be approximately the same for a medical doctor and for an unemployed worker.

Accepted Answer

A) True 
 B)False

Question 7

Economists agree that increases in the money supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically, the government in countries t

Question 8

Suppose a central bank sells government bonds.Use a graph of the money market to show what this does to the value of money.

Accepted Answer

@#IMG-DLM& When a central bank sells government bo

Question 9

If a government supplies more money than the quantity people want to hold,

Accepted Answer

A) spending will decrease and the price level will fall. 
B) spending will increase and the price level will rise. 
C) spending will remain constant but the price level will rise. 
D) there will be no change in the level of economic activity or prices; money is neutral. 
A) spending will decrease and the price level will fall. 
B) spending will increase and the price level will rise. 
C) spending will remain constant but the price level will rise. 
D) there will be no change in the level of economic activity or prices; money is neutral.

Question 10

In the long run, inflation is caused by

Accepted Answer

A) governments that raise taxes so high that it increases the cost of doing business and, hence, raise prices. 
B) banks that have market power and refuse to lend money. 
C) None of these answers. 
D) governments that print too much money. 
E) increases in the price of inputs, such as labour and oil. 
A) governments that raise taxes so high that it increases the cost of doing business and, hence, raise prices. 
B) banks that have market power and refuse to lend money. 
C) None of these answers. 
D) governments that print too much money. 
E) increases in the price of inputs, such as labour and oil.

Question 11

If the price level were to double, the quantity of money demanded would double because people would need twice as much money to cover the same transactions.

Accepted Answer

A) True 
 B)False

Question 12

In the long run, an increase in the money supply tends to have an effect on real variables but no effect on nominal variables.

Accepted Answer

A) True 
 B)False

Question 13

Countries that employ an inflation tax do so because

Accepted Answer

A) the governme doesn't understand the causes and consequences of inflation. 
B) government expenditures are high, and the government has inadequate tax collections and difficulty borrowing. 
C) an inflation tax is the most progressive (paid by the rich) of all taxes. 
D) an inflation tax is the most equitable of all taxes. 
E) the government has a balanced budget. 
A) the governme doesn't understand the causes and consequences of inflation. 
B) government expenditures are high, and the government has inadequate tax collections and difficulty borrowing. 
C) an inflation tax is the most progressive (paid by the rich) of all taxes. 
D) an inflation tax is the most equitable of all taxes. 
E) the government has a balanced budget.

Question 14

With the value of money on the vertical axis, the money supply curve is

Accepted Answer

A) upward sloping because people supply a larger quantity of money when the value of money increases. 
B) downward sloping because people supply a larger quantity of money when the value of money decreases. 
C) horizontal because we assume the central bank controls the money supply. 
D) vertical because we assume the central bank controls the money supply. 
A) upward sloping because people supply a larger quantity of money when the value of money increases. 
B) downward sloping because people supply a larger quantity of money when the value of money decreases. 
C) horizontal because we assume the central bank controls the money supply. 
D) vertical because we assume the central bank controls the money supply.

Question 15

If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by

Accepted Answer

A) 5 per cent. 
B) more than 5 per cent. 
C) less than 5 per cent. 
D) None of these answers. 
A) 5 per cent. 
B) more than 5 per cent. 
C) less than 5 per cent. 
D) None of these answers.

Question 16

When prices are falling, economists say that there is

Accepted Answer

A) disinflation. 
B) deflation. 
C) a contraction. 
D) an inverted inflation. 
A) disinflation. 
B) deflation. 
C) a contraction. 
D) an inverted inflation.

Question 17

The quantity theory of money concludes that an increase in the money supply causes a proportional

Accepted Answer

A) increase in prices. 
B) increase in real output. 
C) decrease in velocity. 
D) increase in velocity. 
E) decrease in prices. 
A) increase in prices. 
B) increase in real output. 
C) decrease in velocity. 
D) increase in velocity. 
E) decrease in prices.

Question 18

If real GDP falls and the nominal interest rate rises, then the equilibrium price level

Accepted Answer

A) must fall. 
B) must rise. 
C) will fall if the effect of the decline in real GDP dominates. 
D) will fall if the effect of the increase in the nominal interest rate dominates. 
A) must fall. 
B) must rise. 
C) will fall if the effect of the decline in real GDP dominates. 
D) will fall if the effect of the increase in the nominal interest rate dominates.

Question 19

Unanticipated inflation benefits

Accepted Answer

A) investors at the expense of savers. 
B) publicly quoted companies at the expense of private partnerships. 
C) borrowers at the expense of lenders. 
D) taxpayers at the expense of government. 
A) investors at the expense of savers. 
B) publicly quoted companies at the expense of private partnerships. 
C) borrowers at the expense of lenders. 
D) taxpayers at the expense of government.

Question 20

When prices rise at an extraordinarily fast rate, it is called

Accepted Answer

A) disinflation. 
B) deflation. 
C) hyperinflation. 
D) inflation. 
E) hypoinflation. 
A) disinflation. 
B) deflation. 
C) hyperinflation. 
D) inflation. 
E) hypoinflation.

If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is

If actual inflation turns out to be greater than people had expected, then

If money is neutral,

If the price level doubles,

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods.How can this be?

The shoeleather costs of inflation should be approximately the same for a medical doctor and for an unemployed worker.

Economists agree that increases in the money supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Suppose a central bank sells government bonds.Use a graph of the money market to show what this does to the value of money.

If a government supplies more money than the quantity people want to hold,

In the long run, inflation is caused by

If the price level were to double, the quantity of money demanded would double because people would need twice as much money to cover the same transactions.

In the long run, an increase in the money supply tends to have an effect on real variables but no effect on nominal variables.

Countries that employ an inflation tax do so because

With the value of money on the vertical axis, the money supply curve is

If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by

When prices are falling, economists say that there is

The quantity theory of money concludes that an increase in the money supply causes a proportional

If real GDP falls and the nominal interest rate rises, then the equilibrium price level

Unanticipated inflation benefits

When prices rise at an extraordinarily fast rate, it is called

What Is Economics

Thinking Like an Economist

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade-Off Between Inflation and Unemployment

Supply Side Policies

The Financial Crisis and Sovereign Debt

Common Currency Areas and European Monetary Union

Filters

Exam 10: Money Growth and Inflation

If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is

If actual inflation turns out to be greater than people had expected, then

If money is neutral,

If the price level doubles,

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods.How can this be?

The shoeleather costs of inflation should be approximately the same for a medical doctor and for an unemployed worker.

Economists agree that increases in the money supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

Suppose a central bank sells government bonds.Use a graph of the money market to show what this does to the value of money.

If a government supplies more money than the quantity people want to hold,

In the long run, inflation is caused by

If the price level were to double, the quantity of money demanded would double because people would need twice as much money to cover the same transactions.

In the long run, an increase in the money supply tends to have an effect on real variables but no effect on nominal variables.

Countries that employ an inflation tax do so because

With the value of money on the vertical axis, the money supply curve is

If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by

When prices are falling, economists say that there is

The quantity theory of money concludes that an increase in the money supply causes a proportional

If real GDP falls and the nominal interest rate rises, then the equilibrium price level

Unanticipated inflation benefits

When prices rise at an extraordinarily fast rate, it is called

What Is Economics

Thinking Like an Economist

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade-Off Between Inflation and Unemployment

Supply Side Policies

The Financial Crisis and Sovereign Debt

Common Currency Areas and European Monetary Union

Filters