Question 1

According to the text, inflation is a continuing increase in the price level.

Accepted Answer

A) True 
 B)False

Question 2

Advocates of incomes policy believe inflation is caused by:

Accepted Answer

A)  an excessive growth in the money supply. 
B)  an excessive growth in aggregate demand. 
C)  ineffective unions. 
D)  excessive monopoly power. 
A)  an excessive growth in the money supply. 
B)  an excessive growth in aggregate demand. 
C)  ineffective unions. 
D)  excessive monopoly power.

Question 3

Who is likely to lose the least from an unanticipated inflation?

Accepted Answer

A)  Chris, who loaned $5,000 to Todd at a fixed rate of interest. 
B)  Janice, whose wage is determined by a five year contract that does not include a cost of living adjustment. 
C)  Beth, who works for a firm that gives its employees an annual cost of living adjustment. 
D)  Steve, who has put his financial assets into a savings account paying a fixed rate of interest. 
A)  Chris, who loaned $5,000 to Todd at a fixed rate of interest. 
B)  Janice, whose wage is determined by a five year contract that does not include a cost of living adjustment. 
C)  Beth, who works for a firm that gives its employees an annual cost of living adjustment. 
D)  Steve, who has put his financial assets into a savings account paying a fixed rate of interest.

Question 4

According to the quantity theory of money:

Accepted Answer

A)  ΔM/M = ΔP/P + ΔGDP/GDP. 
B)  ΔM/M + ΔP/P = ΔGDP/GDP. 
C)  ΔM/M + ΔGDP/GDP = ΔP/P 
D)  ΔM/M = ΔP/P - ΔGDP/GDP 
A)  ΔM/M = ΔP/P + ΔGDP/GDP. 
B)  ΔM/M + ΔP/P = ΔGDP/GDP. 
C)  ΔM/M + ΔGDP/GDP = ΔP/P 
D)  ΔM/M = ΔP/P - ΔGDP/GDP

Question 5

Who is most likely to gain as a result of unanticipated inflation?

Accepted Answer

A)  Roberta who invested $5,000 in real estate before the inflation began. 
B)  Hector who invested $10,000 in government bonds that pay a fixed rate of interest of 5.3 percent. 
C)  James who just signed a two-year consulting contract that does not include a cost of living adjustment. 
D)  Rebecca who put $2,000 in her savings account. 
A)  Roberta who invested $5,000 in real estate before the inflation began. 
B)  Hector who invested $10,000 in government bonds that pay a fixed rate of interest of 5.3 percent. 
C)  James who just signed a two-year consulting contract that does not include a cost of living adjustment. 
D)  Rebecca who put $2,000 in her savings account.

Question 6

Suppose the GDP deflator was 120 in 1997 and 123.6 in 1998. What was the rate of inflation over the period?

Accepted Answer

Inflation

Question 7

The inflation rate may change even if the money supply grows at a constant rate because:

Accepted Answer

A)  velocity is constant in the short run. 
B)  the growth rate of output is constant in the short run. 
C)  the growth rate of output may vary in the short run. 
D)  the growth rate of output is constant in the long run. 
A)  velocity is constant in the short run. 
B)  the growth rate of output is constant in the short run. 
C)  the growth rate of output may vary in the short run. 
D)  the growth rate of output is constant in the long run.

Question 8

The consumer price index (CPI) is:

Accepted Answer

A)  a weighted average of the prices of goods and services purchased by a typical urban household. 
B)  a weighted average of the prices of goods and services purchased by all consumers in the economy. 
C)  a weighted average of the prices of all final goods and services produced in the economy. 
D)  a weighted average of the prices of all intermediate goods and services produced in the economy. 
A)  a weighted average of the prices of goods and services purchased by a typical urban household. 
B)  a weighted average of the prices of goods and services purchased by all consumers in the economy. 
C)  a weighted average of the prices of all final goods and services produced in the economy. 
D)  a weighted average of the prices of all intermediate goods and services produced in the economy.

Question 9

An increase in the inflation rate in the United States will:

Accepted Answer

A)  cause an increase in net exports. 
B)  cause an increase in the relative price of imports. 
C)  cause a decrease in the relative price of exports. 
D)  cause a decrease in the relative price of imports. 
A)  cause an increase in net exports. 
B)  cause an increase in the relative price of imports. 
C)  cause a decrease in the relative price of exports. 
D)  cause a decrease in the relative price of imports.

Question 10

Suppose the money supply is $1,500 billion, the price level is 2.50, and real GDP is $3,000 billion. The income velocity of money is:

Accepted Answer

A)  3. 
B)  4. 
C)  5. 
D)  6. 
A)  3. 
B)  4. 
C)  5. 
D)  6.

Question 11

Evaluate the following statement. "If incomes policies are successful, they will likely result in a misallocation of resources."

Accepted Answer

This statement is correct. Suppose there

Question 12

Suppose the money supply is $450 billion and velocity is 3. What is nominal GDP?

Accepted Answer

Money supply times velocity is

Question 13

Suppose the long-run annual growth rate in real GDP is 4 percent. If monetary authorities want stable prices over the long-run, they should allow the money supply to:

Accepted Answer

A)  increase at 4 percent annually. 
B)  increase between 1 percent and 4 percent annually. 
C)  decrease at 4 percent annually. 
D)  This cannot be determined from the information given. 
A)  increase at 4 percent annually. 
B)  increase between 1 percent and 4 percent annually. 
C)  decrease at 4 percent annually. 
D)  This cannot be determined from the information given.

Question 14

"Inflationary policies followed by the government helped to increase the trade deficit." Is this statement true or False? Defend your answer.

Accepted Answer

It is True that inflation will increase

Question 15

According to the quantity theory of money, velocity varies with changes in real GDP.

Accepted Answer

A) True 
 B)False

Question 16

If you wish to measure price changes of the goods and services bought by households, you should use:

Accepted Answer

A)  the consumer price index. 
B)  the GDP deflator. 
C)  the producer price index for finished goods. 
D)  the producer price index for crude materials. 
A)  the consumer price index. 
B)  the GDP deflator. 
C)  the producer price index for finished goods. 
D)  the producer price index for crude materials.

Question 17

Economists feel that incomes policy, if successful in controlling inflation:

Accepted Answer

A)  is the most desired policy because it allows government to decrease the rate of inflation relatively quickly. 
B)  causes an underallocation of resources to the production of products for which there is high demand. 
C)  causes an underallocation of resources to the production of products for which there is low demand. 
D)  is very cost efficient. 
A)  is the most desired policy because it allows government to decrease the rate of inflation relatively quickly. 
B)  causes an underallocation of resources to the production of products for which there is high demand. 
C)  causes an underallocation of resources to the production of products for which there is low demand. 
D)  is very cost efficient.

Question 18

Suppose the rate of growth in output is 3.5 percent. The rate of growth in the money supply is 6.0 percent. The rate of growth in velocity is 0 percent. What is the inflation rate?

Accepted Answer

A)  9.5 percent. 
B)  6.0 percent. 
C)  3.5 percent. 
D)  2.5 percent. 
A)  9.5 percent. 
B)  6.0 percent. 
C)  3.5 percent. 
D)  2.5 percent.

Question 19

According to the quantity theory of money, an increase in the money supply will cause:

Accepted Answer

A)  a proportional increase in the income velocity of money. 
B)  a proportional decrease in the income velocity of money. 
C)  a proportional increase in nominal GDP. 
D)  a proportional decrease in nominal GDP. 
A)  a proportional increase in the income velocity of money. 
B)  a proportional decrease in the income velocity of money. 
C)  a proportional increase in nominal GDP. 
D)  a proportional decrease in nominal GDP.

Question 20

The number of times the money supply is used to purchase final goods and services during a year refers to:

Accepted Answer

A)  the income velocity of money. 
B)  the growth rate in velocity. 
C)  the income velocity of money times the money supply. 
D)  the growth rate in velocity times the money supply. 
A)  the income velocity of money. 
B)  the growth rate in velocity. 
C)  the income velocity of money times the money supply. 
D)  the growth rate in velocity times the money supply.

According to the text, inflation is a continuing increase in the price level.

Advocates of incomes policy believe inflation is caused by:

Who is likely to lose the least from an unanticipated inflation?

According to the quantity theory of money:

Who is most likely to gain as a result of unanticipated inflation?

Suppose the GDP deflator was 120 in 1997 and 123.6 in 1998. What was the rate of inflation over the period?

The inflation rate may change even if the money supply grows at a constant rate because:

The consumer price index (CPI) is:

An increase in the inflation rate in the United States will:

Suppose the money supply is $1,500 billion, the price level is 2.50, and real GDP is $3,000 billion. The income velocity of money is:

Evaluate the following statement. "If incomes policies are successful, they will likely result in a misallocation of resources."

Suppose the money supply is $450 billion and velocity is 3. What is nominal GDP?

Suppose the long-run annual growth rate in real GDP is 4 percent. If monetary authorities want stable prices over the long-run, they should allow the money supply to:

"Inflationary policies followed by the government helped to increase the trade deficit." Is this statement true or False? Defend your answer.

According to the quantity theory of money, velocity varies with changes in real GDP.

If you wish to measure price changes of the goods and services bought by households, you should use:

Economists feel that incomes policy, if successful in controlling inflation:

Suppose the rate of growth in output is 3.5 percent. The rate of growth in the money supply is 6.0 percent. The rate of growth in velocity is 0 percent. What is the inflation rate?

According to the quantity theory of money, an increase in the money supply will cause:

The number of times the money supply is used to purchase final goods and services during a year refers to:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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Exam 14: Inflation: a Monetary Phenomenon

According to the text, inflation is a continuing increase in the price level.

Advocates of incomes policy believe inflation is caused by:

Who is likely to lose the least from an unanticipated inflation?

According to the quantity theory of money:

Who is most likely to gain as a result of unanticipated inflation?

Suppose the GDP deflator was 120 in 1997 and 123.6 in 1998. What was the rate of inflation over the period?

The inflation rate may change even if the money supply grows at a constant rate because:

The consumer price index (CPI) is:

An increase in the inflation rate in the United States will:

Suppose the money supply is $1,500 billion, the price level is 2.50, and real GDP is $3,000 billion. The income velocity of money is:

Evaluate the following statement. "If incomes policies are successful, they will likely result in a misallocation of resources."

Suppose the money supply is $450 billion and velocity is 3. What is nominal GDP?

Suppose the long-run annual growth rate in real GDP is 4 percent. If monetary authorities want stable prices over the long-run, they should allow the money supply to:

"Inflationary policies followed by the government helped to increase the trade deficit." Is this statement true or False? Defend your answer.

According to the quantity theory of money, velocity varies with changes in real GDP.

If you wish to measure price changes of the goods and services bought by households, you should use:

Economists feel that incomes policy, if successful in controlling inflation:

Suppose the rate of growth in output is 3.5 percent. The rate of growth in the money supply is 6.0 percent. The rate of growth in velocity is 0 percent. What is the inflation rate?

According to the quantity theory of money, an increase in the money supply will cause:

The number of times the money supply is used to purchase final goods and services during a year refers to:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

Filters