Question 1

Figure 30-1  
-Refer to Figure 30-1.If the money supply is MS2 and the value of money is 2,then there is an excess

Accepted Answer

A) demand for money that is represented by the distance between points A and C. 
B) demand for money that is represented by the distance between points A and B. 
C) supply of money that is represented by the distance between points A and C. 
D) supply of money that is represented by the distance between points A and B. 
A) demand for money that is represented by the distance between points A and C. 
B) demand for money that is represented by the distance between points A and B. 
C) supply of money that is represented by the distance between points A and C. 
D) supply of money that is represented by the distance between points A and B. D

Question 2

If P denotes the price of goods and services measured in terms of money,then

Accepted Answer

A) 1/P represents the value of money measured in terms of goods and services. 
B) P can be interpreted as the inflation rate. 
C) the supply of money influences the value of P,but the demand for money does not. 
D) All of the above are correct. 
A) 1/P represents the value of money measured in terms of goods and services. 
B) P can be interpreted as the inflation rate. 
C) the supply of money influences the value of P,but the demand for money does not. 
D) All of the above are correct. A

Question 3

The value of money rises as the price level

Accepted Answer

A) rises,because the number of dollars needed to buy a representative basket of goods rises. 
B) rises,because the number of dollars needed to buy a representative basket of goods falls. 
C) falls,because the number of dollars needed to buy a representative basket of goods rises. 
D) falls,because the number of dollars needed to buy a representative basket of goods falls. 
A) rises,because the number of dollars needed to buy a representative basket of goods rises. 
B) rises,because the number of dollars needed to buy a representative basket of goods falls. 
C) falls,because the number of dollars needed to buy a representative basket of goods rises. 
D) falls,because the number of dollars needed to buy a representative basket of goods falls. D

Question 4

The economy of Mainland uses gold as its money.If the government discovers a large reserve of gold on their land

Accepted Answer

A) the supply of money decreases and the value of money rises. 
B) the supply of money increases and the value of money falls. 
C) the demand for money increases and the value of money rises. 
D) the demand for money decreases and the value of money falls. 
A) the supply of money decreases and the value of money rises. 
B) the supply of money increases and the value of money falls. 
C) the demand for money increases and the value of money rises. 
D) the demand for money decreases and the value of money falls.

Question 5

Ashley puts money in a savings account at her bank earning 2 percent interest.One year later she takes her money out and notes that prices rose 3 percent.Ashley earned a

Accepted Answer

A) ​real interest rate of -1 percent due to inflation. 
B) ​real interest rate of 1 percent due to inflation. 
C) ​nominal interest rate of -1 percent due to inflation. 
D) ​nominal interest rate of 1 percent due to inflation. 
A) ​real interest rate of -1 percent due to inflation. 
B) ​real interest rate of 1 percent due to inflation. 
C) ​nominal interest rate of -1 percent due to inflation. 
D) ​nominal interest rate of 1 percent due to inflation.

Question 6

When deflation exists,

Accepted Answer

A) the real interest rate is less than the nominal interest rate. 
B) the real interest rate is greater than the nominal interest rate. 
C) the real interest rate and inflation are less than the nominal interest rate. 
D) prices rise. 
A) the real interest rate is less than the nominal interest rate. 
B) the real interest rate is greater than the nominal interest rate. 
C) the real interest rate and inflation are less than the nominal interest rate. 
D) prices rise.

Question 7

In the fourteenth century,the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold,which was in use as a medium of exchange.We would predict that this increase in gold

Accepted Answer

A) raised both the price level and the value of gold in Cairo. 
B) raised the price level,but decreased the value of gold in Cairo. 
C) lowered the price level,but increased the value of gold in Cairo. 
D) lowered both the price level and the value of gold in Cairo. 
A) raised both the price level and the value of gold in Cairo. 
B) raised the price level,but decreased the value of gold in Cairo. 
C) lowered the price level,but increased the value of gold in Cairo. 
D) lowered both the price level and the value of gold in Cairo.

Question 8

When the money market is drawn with the value of money on the vertical axis,the value of money decreases if

Accepted Answer

A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right. 
A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right.

Question 9

When money is neutral,which of the following increases when the money supply growth rate increases?

Accepted Answer

A) real output growth 
B) real interest rates 
C) nominal interest rates 
D) the money supply divided by the price level 
A) real output growth 
B) real interest rates 
C) nominal interest rates 
D) the money supply divided by the price level

Question 10

According to the classical dichotomy,which of the following is influenced by monetary factors?

Accepted Answer

A) the real wage. 
B) the real interest rate. 
C) the nominal interest rate. 
D) All of the above are correct. 
A) the real wage. 
B) the real interest rate. 
C) the nominal interest rate. 
D) All of the above are correct.

Question 11

The price level rises if either

Accepted Answer

A) money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a rise in the value of money. 
B) money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a fall in the value of money. 
C) money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a rise in the value of money. 
D) money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a fall in the value of money. 
A) money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a rise in the value of money. 
B) money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a fall in the value of money. 
C) money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a rise in the value of money. 
D) money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a fall in the value of money.

Question 12

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Accepted Answer

A) the inflation rate and real interest rates. 
B) the inflation rate,but not real interest rates. 
C) real interest rates,but not the inflation rate. 
D) neither the inflation rate nor real interest rates. 
A) the inflation rate and real interest rates. 
B) the inflation rate,but not real interest rates. 
C) real interest rates,but not the inflation rate. 
D) neither the inflation rate nor real interest rates.

Question 13

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.  
-Refer to Figure 30-2.What quantity is measured along the horizontal axis?

Accepted Answer

A) the price level 
B) the real interest rate 
C) the value of money 
D) the quantity of money 
A) the price level 
B) the real interest rate 
C) the value of money 
D) the quantity of money

Question 14

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.  
-Refer to Figure 30-3.Suppose the relevant money-supply curve is the one labeled MS1;also suppose the economy's real GDP is 30,000 for the year.If the money market is in equilibrium,then the velocity of money is approximately

Accepted Answer

A) 3.0 
B) 6.0 
C) 9.0 
D) 1.5 
A) 3.0 
B) 6.0 
C) 9.0 
D) 1.5

Question 15

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

Accepted Answer

A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) the money supply. 
A) the value of money. 
B) real interest rates. 
C) nominal interest rates. 
D) the money supply.

Question 16

When the money market is drawn with the value of money on the vertical axis,the price level increases if

Accepted Answer

A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right. 
A) either money demand or money supply shifts right. 
B) either money demand or money supply shifts left. 
C) money demand shifts right or money supply shifts left. 
D) money demand shifts left or money supply shifts right.

Question 17

If Y and M are constant and V doubles,the quantity equation implies that the price level

Accepted Answer

A) falls to half its original level. 
B) doubles. 
C) more than doubles. 
D) does not change. 
A) falls to half its original level. 
B) doubles. 
C) more than doubles. 
D) does not change.

Question 18

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

Accepted Answer

A) Austria in the 1920's. 
B) Hungary in the 1920's. 
C) Poland in the 1920's. 
D) All of the above are correct. 
A) Austria in the 1920's. 
B) Hungary in the 1920's. 
C) Poland in the 1920's. 
D) All of the above are correct.

Question 19

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.  
-Refer to Figure 30-2.Suppose the relevant money-demand curve is the one labeled MD1;also suppose the velocity of money is 4.If the money market is in equilibrium,then the economy's real GDP amounts to

Accepted Answer

A) 2,500. 
B) 7,500. 
C) 10,000. 
D) 40,000. 
A) 2,500. 
B) 7,500. 
C) 10,000. 
D) 40,000.

Question 20

Suppose over some period of time the money supply tripled,velocity doubled,and real GDP doubled.According to the quantity equation the price level is now

Accepted Answer

A) 6 times its old value. 
B) 3 times its old value. 
C) 1.5 times its old value. 
D) 0.75 times its old value. 
A) 6 times its old value. 
B) 3 times its old value. 
C) 1.5 times its old value. 
D) 0.75 times its old value.

Exam 17: Money Growth and Inflation: The Classical Theory of Inflation

Figure 30-1 -Refer to Figure 30-1.If the money supply is MS2 and the value of money is 2,then there is an excess

If P denotes the price of goods and services measured in terms of money,then

The value of money rises as the price level

The economy of Mainland uses gold as its money.If the government discovers a large reserve of gold on their land

Ashley puts money in a savings account at her bank earning 2 percent interest.One year later she takes her money out and notes that prices rose 3 percent.Ashley earned a

When deflation exists,

In the fourteenth century,the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold,which was in use as a medium of exchange.We would predict that this increase in gold

When the money market is drawn with the value of money on the vertical axis,the value of money decreases if

When money is neutral,which of the following increases when the money supply growth rate increases?

According to the classical dichotomy,which of the following is influenced by monetary factors?

The price level rises if either

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.What quantity is measured along the horizontal axis?

When the money market is drawn with the value of money on the vertical axis,long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

When the money market is drawn with the value of money on the vertical axis,the price level increases if

If Y and M are constant and V doubles,the quantity equation implies that the price level

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

Suppose over some period of time the money supply tripled,velocity doubled,and real GDP doubled.According to the quantity equation the price level is now

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Figure 30-1 -Refer to Figure 30-1.If the money supply is MS₂ and the value of money is 2,then there is an excess