Question 1

If an economy produces 2,000 units of output with a price level of $1 and the money supply (M)is $1,000,velocity is:

Accepted Answer

A) 2. 
B) 500. 
C) 50. 
D) .5. 
A) 2. 
B) 500. 
C) 50. 
D) .5. A

Question 2

According to the quantity theory of money,a decrease in prices would be due to:

Accepted Answer

A) a decrease in the money supply. 
B) an increase in the money supply. 
C) a decrease in the production of output. 
D) an increase in the production of output. 
A) a decrease in the money supply. 
B) an increase in the money supply. 
C) a decrease in the production of output. 
D) an increase in the production of output. A

Question 3

When real rates of interest are negative,borrowers:

Accepted Answer

A) benefit,because the value of their debt declines. 
B) suffer,because the value of their debt declines. 
C) benefit,because the value of their debt increases. 
D) suffer,because the value of their debt increases. 
A) benefit,because the value of their debt declines. 
B) suffer,because the value of their debt declines. 
C) benefit,because the value of their debt increases. 
D) suffer,because the value of their debt increases. A

Question 4

When real rates of interest are positive,it is better to be a:

Accepted Answer

A) saver than a borrower,because the value of savings and debts are increasing. 
B) borrower than a saver,because the value of savings and debts are increasing. 
C) saver than a borrower,because the value of savings and debts are decreasing. 
D) borrower than a saver,because the value of savings and debts are decreasing. 
A) saver than a borrower,because the value of savings and debts are increasing. 
B) borrower than a saver,because the value of savings and debts are increasing. 
C) saver than a borrower,because the value of savings and debts are decreasing. 
D) borrower than a saver,because the value of savings and debts are decreasing.

Question 5

________ inflation is more stable than __________ inflation,because it ____________.

Accepted Answer

A) Core;headline;excludes food and gasoline prices 
B) Headline;core;excludes food and gasoline prices 
C) Core;headline;does not exclude food and gasoline prices 
D) Headline;core;does not exclude food and gasoline prices 
A) Core;headline;excludes food and gasoline prices 
B) Headline;core;excludes food and gasoline prices 
C) Core;headline;does not exclude food and gasoline prices 
D) Headline;core;does not exclude food and gasoline prices

Question 6

When an economy experiences deflation,consumption:

Accepted Answer

A) will decrease,because people will want to wait for prices to drop before spending. 
B) will increase,because people will want to wait for prices to drop before spending. 
C) will decrease,because people will lose value in their savings. 
D) will increase,because people will lose value in their savings. 
A) will decrease,because people will want to wait for prices to drop before spending. 
B) will increase,because people will want to wait for prices to drop before spending. 
C) will decrease,because people will lose value in their savings. 
D) will increase,because people will lose value in their savings.

Question 7

Core inflation is a measure of:

Accepted Answer

A) inflation that excludes goods with historically volatile price changes. 
B) an overall rise in prices in the economy. 
C) the Consumer Price Index with durable goods excluded. 
D) the change in the Consumer Price Index with durable goods excluded. 
A) inflation that excludes goods with historically volatile price changes. 
B) an overall rise in prices in the economy. 
C) the Consumer Price Index with durable goods excluded. 
D) the change in the Consumer Price Index with durable goods excluded.

Question 8

The severe oil shortages of the 1970s created:

Accepted Answer

A) cost push inflation. 
B) demand pull inflation. 
C) a recession. 
D) the velocity of money to rise. 
A) cost push inflation. 
B) demand pull inflation. 
C) a recession. 
D) the velocity of money to rise.

Question 9

While the __________ is immaterial,the _________ can have a big effect on economic behavior.

Accepted Answer

A) price level;unpredicted change in the price level 
B) unpredicted change in the price level;price level 
C) price level;predictable change in the price level 
D) predictable change in the price level;price level 
A) price level;unpredicted change in the price level 
B) unpredicted change in the price level;price level 
C) price level;predictable change in the price level 
D) predictable change in the price level;price level

Question 10

The quantity equation states:

Accepted Answer

A) M × V = P × Y. 
B) M × P = Y × V. 
C) P × V = M × Y. 
D) None of these statements is true. 
A) M × V = P × Y. 
B) M × P = Y × V. 
C) P × V = M × Y. 
D) None of these statements is true.

Question 11

Nominal output is the _________ of goods and services,and real output is the _______ of goods and services.

Accepted Answer

A) dollar value;actual amount 
B) actual amount;dollar value 
C) actual amount;dollar value with inflation 
D) dollar value with inflation;dollar value 
A) dollar value;actual amount 
B) actual amount;dollar value 
C) actual amount;dollar value with inflation 
D) dollar value with inflation;dollar value

Question 12

Holding a currency to the gold standard works:

Accepted Answer

A) to the advantage of savers at the expense of borrowers. 
B) to the advantage of borrowers at the expense of savers. 
C) for no one,and hurts both savers and borrowers from access to money. 
D) for everyone,benefiting both savers and borrowers. 
A) to the advantage of savers at the expense of borrowers. 
B) to the advantage of borrowers at the expense of savers. 
C) for no one,and hurts both savers and borrowers from access to money. 
D) for everyone,benefiting both savers and borrowers.

Question 13

The money,time,and opportunity used to change prices to keep pace with inflation are called:

Accepted Answer

A) menu costs. 
B) shoe-leather costs. 
C) tax distortions. 
D) the velocity of inflation. 
A) menu costs. 
B) shoe-leather costs. 
C) tax distortions. 
D) the velocity of inflation.

Question 14

If the real rate of return is 2 percent,and the inflation rate is 0 percent,then the nominal interest rate must be:

Accepted Answer

A) 2 percent. 
B) 0 percent. 
C) 4 percent. 
D) -2 percent. 
A) 2 percent. 
B) 0 percent. 
C) 4 percent. 
D) -2 percent.

Question 15

The idea that aggregate price levels do not affect real outcomes in the economy is called:

Accepted Answer

A) the neutrality of money. 
B) the aggregate price theory. 
C) the neutrality of prices. 
D) the real output theory. 
A) the neutrality of money. 
B) the aggregate price theory. 
C) the neutrality of prices. 
D) the real output theory.

Question 16

If the real rate of return is 3 percent,and the inflation rate is 4 percent,then the nominal interest rate must be:

Accepted Answer

A) -1 percent. 
B) 1 percent. 
C) 7 percent. 
D) -7 percent. 
A) -1 percent. 
B) 1 percent. 
C) 7 percent. 
D) -7 percent.

Question 17

A period when overall inflation rates are positive but falling is called:

Accepted Answer

A) disinflation. 
B) deflation. 
C) inflation. 
D) zero price level. 
A) disinflation. 
B) deflation. 
C) inflation. 
D) zero price level.

Question 18

________ inflation is more stable than __________ inflation,because it excludes food and gasoline prices.

Accepted Answer

A) Core;headline 
B) Headline;core 
C) Core;nominal 
D) Nominal;core 
A) Core;headline 
B) Headline;core 
C) Core;nominal 
D) Nominal;core

Question 19

Tax distortions refer to the cost of inflation that comes from:

Accepted Answer

A) the money,time,and opportunity used to change prices to keep pace with inflation. 
B) the time,money,and effort one has to spend managing cash in the face of inflation. 
C) being penalized via taxes for making more money in dollars,even though real purchasing power hasn't changed at all. 
D) None of these statements is true. 
A) the money,time,and opportunity used to change prices to keep pace with inflation. 
B) the time,money,and effort one has to spend managing cash in the face of inflation. 
C) being penalized via taxes for making more money in dollars,even though real purchasing power hasn't changed at all. 
D) None of these statements is true.

Question 20

The relationship between money supply,output,and the overall level of prices is illustrated by:

Accepted Answer

A) the classical theory of inflation. 
B) the neutrality of money. 
C) the aggregate price level. 
D) the measure of real output. 
A) the classical theory of inflation. 
B) the neutrality of money. 
C) the aggregate price level. 
D) the measure of real output.

Exam 32: Inflation

If an economy produces 2,000 units of output with a price level of $1 and the money supply (M)is $1,000,velocity is:

According to the quantity theory of money,a decrease in prices would be due to:

When real rates of interest are negative,borrowers:

When real rates of interest are positive,it is better to be a:

________ inflation is more stable than __________ inflation,because it ____________.

When an economy experiences deflation,consumption:

Core inflation is a measure of:

The severe oil shortages of the 1970s created:

While the __________ is immaterial,the _________ can have a big effect on economic behavior.

The quantity equation states:

Nominal output is the _________ of goods and services,and real output is the _______ of goods and services.

Holding a currency to the gold standard works:

The money,time,and opportunity used to change prices to keep pace with inflation are called:

If the real rate of return is 2 percent,and the inflation rate is 0 percent,then the nominal interest rate must be:

The idea that aggregate price levels do not affect real outcomes in the economy is called:

If the real rate of return is 3 percent,and the inflation rate is 4 percent,then the nominal interest rate must be:

A period when overall inflation rates are positive but falling is called:

________ inflation is more stable than __________ inflation,because it excludes food and gasoline prices.

Tax distortions refer to the cost of inflation that comes from:

The relationship between money supply,output,and the overall level of prices is illustrated by:

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Consumer Behavior

Behavioral Economics: A Closer Look at Decision Making

Game Theory and Strategic Thinking

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Factors of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Measuring the Wealth of Nations

The Cost of Living

Economic Growth

Unemployment and the Demand for Labor

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Basics of Finance

Money and the Monetary System

Financial Crisis

Open-Market Macroeconomics

Development Economics

Filters

inflation is more stable than inflation,because it ______.

While the __ is immaterial,the _ can have a big effect on economic behavior.

Nominal output is the ___ of goods and services,and real output is the _ of goods and services.

inflation is more stable than __ inflation,because it excludes food and gasoline prices.