Question 1

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Accepted Answer

A) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased. 
B) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased. 
C) your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased. 
D) your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased. 
A) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased. 
B) your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased. 
C) your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased. 
D) your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased.

Question 2

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Accepted Answer

A) inflation and nominal interest rates,but does not change real interest rates. 
B) inflation,nominal interest rates,and real interest rates. 
C) inflation and real interest rates,but does not change nominal interest rates. 
D) nominal interest rates and real interest rates,but does not change inflation. 
A) inflation and nominal interest rates,but does not change real interest rates. 
B) inflation,nominal interest rates,and real interest rates. 
C) inflation and real interest rates,but does not change nominal interest rates. 
D) nominal interest rates and real interest rates,but does not change inflation.

Question 3

The nominal interest rate is 5 percent and the inflation rate is 2 percent.What is the real interest rate?

Accepted Answer

A) 7 percent 
B) 2.5 percent 
C) 10 percent 
D) 3 percent 
A) 7 percent 
B) 2.5 percent 
C) 10 percent 
D) 3 percent

Question 4

Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A) is 1.5 times its old value. 
B) is 3 times its old value. 
C) is 6 times its old value. 
D) is the same as its old value. 
A) is 1.5 times its old value. 
B) is 3 times its old value. 
C) is 6 times its old value. 
D) is the same as its old value.

Question 5

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.At the end of 2009 the relevant money-supply curve was the one labeled MS1.At the end of 2010 the relevant money-supply curve was the one labeled MS2.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2010?

Accepted Answer

A) -33 percent 
B) 17 percent 
C) 50 percent 
D) 67 percent 
A) -33 percent 
B) 17 percent 
C) 50 percent 
D) 67 percent

Question 6

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

Accepted Answer

A) shifts rightward,causing the value of money measured in terms of goods and services to rise. 
B) shifts rightward,causing the value of money measured in terms of goods and services to fall. 
C) shifts leftward,causing the value of money measured in terms of goods and services to rise. 
D) shifts leftward,causing the value of money measured in terms of goods and services to fall. 
A) shifts rightward,causing the value of money measured in terms of goods and services to rise. 
B) shifts rightward,causing the value of money measured in terms of goods and services to fall. 
C) shifts leftward,causing the value of money measured in terms of goods and services to rise. 
D) shifts leftward,causing the value of money measured in terms of goods and services to fall.

Question 7

The supply of money increases when

Accepted Answer

A) the price level falls. 
B) the interest rate increases. 
C) the Fed makes open-market purchases. 
D) money demand increases. 
A) the price level falls. 
B) the interest rate increases. 
C) the Fed makes open-market purchases. 
D) money demand increases.

Question 8

Your spouse complains that her 6% raise this year will not keep up with the increase in prices.In other words,she is unable to buy the same basket of goods with her 6% raise.Therefore,she believes that her

Accepted Answer

A) nominal income and real income increased. 
B) nominal income increased,but their real income decreased. 
C) nominal income and real income decreased. 
D) nominal income decreased,but their real income increased. 
A) nominal income and real income increased. 
B) nominal income increased,but their real income decreased. 
C) nominal income and real income decreased. 
D) nominal income decreased,but their real income increased.

Question 9

When the money market is drawn with the value of money on the vertical axis,if the value of money is above the equilibrium level,

Accepted Answer

A) the price level will rise. 
B) the value of money will rise. 
C) money demand will shift leftward. 
D) money demand will shift rightward. 
A) the price level will rise. 
B) the value of money will rise. 
C) money demand will shift leftward. 
D) money demand will shift rightward.

Question 10

According to the assumptions of the quantity theory of money,if the money supply decreases by 7 percent,then

Accepted Answer

A) nominal and real GDP would fall by 7 percent. 
B) nominal GDP would fall by 7 percent;real GDP would be unchanged. 
C) nominal GDP would be unchanged;real GDP would fall by 7 percent. 
D) neither nominal GDP nor real GDP would change. 
A) nominal and real GDP would fall by 7 percent. 
B) nominal GDP would fall by 7 percent;real GDP would be unchanged. 
C) nominal GDP would be unchanged;real GDP would fall by 7 percent. 
D) neither nominal GDP nor real GDP would change.

Question 11

Which of the following is correct?

Accepted Answer

A) If the Fed purchases bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
B) If the Fed sells bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
C) If the Fed purchases bonds,then the money supply curve shifts right.An increase in the price level shifts the money supply curve right. 
D) If the Fed sells bonds,then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right. 
A) If the Fed purchases bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
B) If the Fed sells bonds in the open market,then the money supply curve shifts right.A change in the price level does not shift the money supply curve. 
C) If the Fed purchases bonds,then the money supply curve shifts right.An increase in the price level shifts the money supply curve right. 
D) If the Fed sells bonds,then the money supply curve shifts right.A decrease in the price level shifts the money supply curve right.

Question 12

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 13

According to the classical dichotomy,when the money supply doubles,which of the following also doubles?

Accepted Answer

A) the price level and nominal wages 
B) the price level,but not the nominal wage 
C) the nominal wage,but not the price level 
D) neither the nominal wage nor the price level 
A) the price level and nominal wages 
B) the price level,but not the nominal wage 
C) the nominal wage,but not the price level 
D) neither the nominal wage nor the price level

Question 14

The payments you make on your automobile loan are given in terms of dollars.As prices rise you notice you give up fewer goods to make your payments.

Accepted Answer

A) The dollar amount you pay is a nominal value.The number of goods you give up is a real value. 
B) The dollar amount you pay is a real value.The number of goods you give up is a nominal value. 
C) Both the dollar amount you pay and the goods you give up are nominal values. 
D) Both the dollar amount you pay and the goods you give up are real values. 
A) The dollar amount you pay is a nominal value.The number of goods you give up is a real value. 
B) The dollar amount you pay is a real value.The number of goods you give up is a nominal value. 
C) Both the dollar amount you pay and the goods you give up are nominal values. 
D) Both the dollar amount you pay and the goods you give up are real values.

Question 15

According to the classical dichotomy,when the money supply doubles which of the following doubles?

Accepted Answer

A) the price level and nominal GDP 
B) the price level and real GDP 
C) only real GDP 
D) only the price level 
A) the price level and nominal GDP 
B) the price level and real GDP 
C) only real GDP 
D) only the price level

Question 16

Open-market purchases by the Fed

Accepted Answer

A) make the price level and value of money fall. 
B) make the price level rise,and make the value of money fall. 
C) make the price level and make the value of money rise. 
D) make the price level fall,and make the value of money rise. 
A) make the price level and value of money fall. 
B) make the price level rise,and make the value of money fall. 
C) make the price level and make the value of money rise. 
D) make the price level fall,and make the value of money rise.

Question 17

From the early 1980's through the 1990's,the nominal interest rate

Accepted Answer

A) fell because the Fed got inflation under control. 
B) fell because the Fed let inflation get out of control. 
C) rose because the Fed got inflation under control. 
D) rose because the Fed let inflation get out of control. 
A) fell because the Fed got inflation under control. 
B) fell because the Fed let inflation get out of control. 
C) rose because the Fed got inflation under control. 
D) rose because the Fed let inflation get out of control.

Question 18

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

Accepted Answer

A) money demand shifts right and decreases if money supply shifts right. 
B) money demand shifts right and decreases if money supply shifts left. 
C) money demand shifts left and decreases if money supply shifts right. 
D) money demand shifts left and decreases if money supply shifts left. 
A) money demand shifts right and decreases if money supply shifts right. 
B) money demand shifts right and decreases if money supply shifts left. 
C) money demand shifts left and decreases if money supply shifts right. 
D) money demand shifts left and decreases if money supply shifts left.

Question 19

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

Accepted Answer

A) nominal wages 
B) the price level 
C) nominal GDP 
D) All of the above are correct. 
A) nominal wages 
B) the price level 
C) nominal GDP 
D) All of the above are correct.

Question 20

Last year,you earned a nominal wage of $10 per hour and the price level was 120.This year your nominal wage is $11 per hour,but you are unable to purchase the same amount of goods as last year.The price level this year must be

Accepted Answer

A) 135 
B) 132 
C) 125 
D) 121 
A) 135 
B) 132 
C) 125 
D) 121

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

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

The nominal interest rate is 5 percent and the inflation rate is 2 percent.What is the real interest rate?

Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

The supply of money increases when

Your spouse complains that her 6% raise this year will not keep up with the increase in prices.In other words,she is unable to buy the same basket of goods with her 6% raise.Therefore,she believes that her

When the money market is drawn with the value of money on the vertical axis,if the value of money is above the equilibrium level,

According to the assumptions of the quantity theory of money,if the money supply decreases by 7 percent,then

Which of the following is correct?

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

According to the classical dichotomy,when the money supply doubles,which of the following also doubles?

The payments you make on your automobile loan are given in terms of dollars.As prices rise you notice you give up fewer goods to make your payments.

According to the classical dichotomy,when the money supply doubles which of the following doubles?

Open-market purchases by the Fed

From the early 1980's through the 1990's,the nominal interest rate

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

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

Last year,you earned a nominal wage of $10 per hour and the price level was 120.This year your nominal wage is $11 per hour,but you are unable to purchase the same amount of goods as last year.The price level this year must be

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