Question 1

Velocity is

Accepted Answer

A) Y/(M x P)and increases if dollars are exchanged less frequently. 
B) Y/(M x P)and increases if dollars are exchanged more frequently. 
C) (P x Y)/M and increases if dollars are exchanged less frequently. 
D) (P x Y)/M and increases if dollars are exchanged more frequently. 
A) Y/(M x P)and increases if dollars are exchanged less frequently. 
B) Y/(M x P)and increases if dollars are exchanged more frequently. 
C) (P x Y)/M and increases if dollars are exchanged less frequently. 
D) (P x Y)/M and increases if dollars are exchanged more frequently.

Question 2

The money supply is 4,000,nominal GDP is 8,000,and real GDP is 2,000.Which of the following is 2?

Accepted Answer

A) the price level and velocity. 
B) the price level but not velocity. 
C) velocity but not the price level. 
D) neither the price level nor velocity. 
A) the price level and velocity. 
B) the price level but not velocity. 
C) velocity but not the price level. 
D) neither the price level nor velocity.

Question 3

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.You compute the price of jeans relative to tee-shirts.

Accepted Answer

A) The dollar price of jeans and the relative price of jeans are both nominal variables. 
B) The dollar price of jeans and the relative price of jeans are both real variables. 
C) The dollar price of jeans is a nominal variable;the relative price of jeans is a real variable. 
D) The dollar price of jeans is a real variable;the relative price of jeans is a nominal variable. 
A) The dollar price of jeans and the relative price of jeans are both nominal variables. 
B) The dollar price of jeans and the relative price of jeans are both real variables. 
C) The dollar price of jeans is a nominal variable;the relative price of jeans is a real variable. 
D) The dollar price of jeans is a real variable;the relative price of jeans is a nominal variable.

Question 4

Money demand refers to

Accepted Answer

A) the total quantity of financial assets that people want to hold. 
B) how much income people want to earn per year. 
C) how much wealth people want to hold in liquid form. 
D) how much currency the Federal Reserve decides to print. 
A) the total quantity of financial assets that people want to hold. 
B) how much income people want to earn per year. 
C) how much wealth people want to hold in liquid form. 
D) how much currency the Federal Reserve decides to print.

Question 5

Monetary neutrality means that a change in the money supply

Accepted Answer

A) does not change real GDP.Most economists think this is a good description of the economy in the short run and in the long run. 
B) does not change real GDP.Most economists think this is a good description of the economy in the long run but not the short run. 
C) does change real GDP.Most economists think this is a good description of the economy in the short-run and the long run. 
D) does change real GDP.Most economists think this is a good description of the economy in the long run but not the short run. 
A) does not change real GDP.Most economists think this is a good description of the economy in the short run and in the long run. 
B) does not change real GDP.Most economists think this is a good description of the economy in the long run but not the short run. 
C) does change real GDP.Most economists think this is a good description of the economy in the short-run and the long run. 
D) does change real GDP.Most economists think this is a good description of the economy in the long run but not the short run.

Question 6

When the money market is drawn with the value of money on the vertical axis,as the price level decreases the quantity of money

Accepted Answer

A) demanded increases. 
B) demanded decreases. 
C) supplied increases. 
D) supplied decreases. 
A) demanded increases. 
B) demanded decreases. 
C) supplied increases. 
D) supplied decreases.

Question 7

Other things the same,an increase in velocity means that

Accepted Answer

A) the rate at which money changes hands falls,so the price level rises. 
B) the rate at which money changes hands falls,so the price level falls. 
C) the rate at which money changes hands rises,so the price level rises. 
D) the rate at which money changes hands rises,so the price level falls. 
A) the rate at which money changes hands falls,so the price level rises. 
B) the rate at which money changes hands falls,so the price level falls. 
C) the rate at which money changes hands rises,so the price level rises. 
D) the rate at which money changes hands rises,so the price level falls.

Question 8

If velocity = 4,the quantity of money = 20,000,and the price level = 2.5,then the real value of output is

Accepted Answer

A) 2,000. 
B) 200,000. 
C) 12,500. 
D) 32,000. 
A) 2,000. 
B) 200,000. 
C) 12,500. 
D) 32,000.

Question 9

Interest rates adjusted for the effects of inflation

Accepted Answer

A) and inflation are nominal variables. 
B) and inflation are real variables. 
C) are real variables;inflation is a nominal variable. 
D) are nominal variables;inflation is a real variable. 
A) and inflation are nominal variables. 
B) and inflation are real variables. 
C) are real variables;inflation is a nominal variable. 
D) are nominal variables;inflation is a real variable.

Question 10

Banks advertise

Accepted Answer

A) the real interest rate,which is how fast the dollar value of savings grows. 
B) the real interest rate,which is how fast the purchasing power of savings grows. 
C) the nominal interest rate,which is how fast the dollar value of savings grows. 
D) the nominal interest rate,which is how fast the purchasing power of savings grows. 
A) the real interest rate,which is how fast the dollar value of savings grows. 
B) the real interest rate,which is how fast the purchasing power of savings grows. 
C) the nominal interest rate,which is how fast the dollar value of savings grows. 
D) the nominal interest rate,which is how fast the purchasing power of savings grows.

Question 11

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

Accepted Answer

A) and equilibrium quantity of money to increase. 
B) and equilibrium quantity of money to decrease. 
C) to increase,while the equilibrium quantity of money decreases. 
D) to decrease,while the equilibrium quantity of money increases. 
A) and equilibrium quantity of money to increase. 
B) and equilibrium quantity of money to decrease. 
C) to increase,while the equilibrium quantity of money decreases. 
D) to decrease,while the equilibrium quantity of money increases.

Question 12

Which of the following can a country increase in the long run by increasing its money growth rate?

Accepted Answer

A) the nominal wage. 
B) real output. 
C) real interest rates. 
D) the real wage. 
A) the nominal wage. 
B) real output. 
C) real interest rates. 
D) the real wage.

Question 13

If P = 4 and Y = 200,then which of the following pairs of values are possible?

Accepted Answer

A) M = 800,V = 16 
B) M = 150,V = 3 
C) M = 400,V = 2 
D) M = 200,V = 2 
A) M = 800,V = 16 
B) M = 150,V = 3 
C) M = 400,V = 2 
D) M = 200,V = 2

Question 14

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Accepted Answer

A) excess demand for money which causes the price level to rise. 
B) excess demand for money which causes the price level to fall. 
C) excess supply of money which causes the price level to rise. 
D) excess supply of money which causes the price level to fall. 
A) excess demand for money which causes the price level to rise. 
B) excess demand for money which causes the price level to fall. 
C) excess supply of money which causes the price level to rise. 
D) excess supply of money which causes the price level to fall.

Question 15

Based on the quantity equation,if M = 100,V = 3,and Y = 150,then P =

Accepted Answer

A) 1. 
B) 1.5. 
C) 2. 
D) 4.5. 
A) 1. 
B) 1.5. 
C) 2. 
D) 4.5.

Question 16

The Fisher effect says that

Accepted Answer

A) the nominal interest rate adjusts one for one with the inflation rate. 
B) the growth rate of the money supply is negatively related to the velocity of money. 
C) real variables are heavily influenced by the monetary system. 
D) All of the above are correct. 
A) the nominal interest rate adjusts one for one with the inflation rate. 
B) the growth rate of the money supply is negatively related to the velocity of money. 
C) real variables are heavily influenced by the monetary system. 
D) All of the above are correct.

Question 17

Over time both real GDP and the price level have trended upward.Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?

Accepted Answer

A) both the upward trend in real GDP and the upward trend in the price level 
B) the upward trend in real GDP but not the upward trend in the price level 
C) the upward trend in the price level but not the upward trend in real GDP 
D) neither the upward trend in the price level nor the upward trend in real GDP 
A) both the upward trend in real GDP and the upward trend in the price level 
B) the upward trend in real GDP but not the upward trend in the price level 
C) the upward trend in the price level but not the upward trend in real GDP 
D) neither the upward trend in the price level nor the upward trend in real GDP

Question 18

As the price level decreases,the value of money

Accepted Answer

A) increases,so people must hold less money to purchase goods and services. 
B) increases,so people must hold more money to purchase goods and services. 
C) decreases,so people must hold more money to purchase goods and services. 
D) decreases,so people must hold less money to purchase goods and services. 
A) increases,so people must hold less money to purchase goods and services. 
B) increases,so people must hold more money to purchase goods and services. 
C) decreases,so people must hold more money to purchase goods and services. 
D) decreases,so people must hold less money to purchase goods and services.

Question 19

To explain the long-run determinants of the price level and the inflation rate,most economists today rely on the

Accepted Answer

A) quantity theory of money. 
B) price-index theory of money. 
C) theory of hyperinflation. 
D) disequilibrium theory of money and inflation. 
A) quantity theory of money. 
B) price-index theory of money. 
C) theory of hyperinflation. 
D) disequilibrium theory of money and inflation.

Question 20

Which of the following is not implied by the quantity equation?

Accepted Answer

A) If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in nominal output. 
B) If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in the price level. 
C) With constant money supply and output,an increase in velocity creates an increase in the price level. 
D) With constant money supply and velocity,an increase in output creates a proportional increase in the price level. 
A) If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in nominal output. 
B) If velocity is stable and money is neutral,an increase in the money supply creates a proportional increase in the price level. 
C) With constant money supply and output,an increase in velocity creates an increase in the price level. 
D) With constant money supply and velocity,an increase in output creates a proportional increase in the price level.

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

Velocity is

The money supply is 4,000,nominal GDP is 8,000,and real GDP is 2,000.Which of the following is 2?

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.You compute the price of jeans relative to tee-shirts.

Money demand refers to

Monetary neutrality means that a change in the money supply

When the money market is drawn with the value of money on the vertical axis,as the price level decreases the quantity of money

Other things the same,an increase in velocity means that

If velocity = 4,the quantity of money = 20,000,and the price level = 2.5,then the real value of output is

Interest rates adjusted for the effects of inflation

Banks advertise

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply causes the equilibrium value of money

Which of the following can a country increase in the long run by increasing its money growth rate?

If P = 4 and Y = 200,then which of the following pairs of values are possible?

When the money market is drawn with the value of money on the vertical axis,if money demand shifts leftward,then initially there is an

Based on the quantity equation,if M = 100,V = 3,and Y = 150,then P =

The Fisher effect says that

Over time both real GDP and the price level have trended upward.Which of these trends would the classical dichotomy say could be explained by an upward trend in the money supply?

As the price level decreases,the value of money

To explain the long-run determinants of the price level and the inflation rate,most economists today rely on the

Which of the following is not implied by the quantity equation?

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