Question 1

Compared to the nominal interest rate, the real interest rate is:

Accepted Answer

A)  negative 
B)  always smaller 
C)  always greater than zero 
D)  relatively stable 
E)  relatively volatile 
A)  negative 
B)  always smaller 
C)  always greater than zero 
D)  relatively stable 
E)  relatively volatile D

Question 2

When discussing inflation, we generally speak of it in terms of:

Accepted Answer

A)  the percent change in the consumer price index 
B)  the percent change in the GDP deflator 
C)  the level of the consumer price index 
D)  one over the consumer price index 
E)  the change in the producer price index 
A)  the percent change in the consumer price index 
B)  the percent change in the GDP deflator 
C)  the level of the consumer price index 
D)  one over the consumer price index 
E)  the change in the producer price index A

Question 3

Fiat money has value because:

Accepted Answer

A)  it is backed by gold 
B)  people believe it has value 
C)  it has intrinsic value 
D)  it is backed by silver 
E)  None of these answers are correct. 
A)  it is backed by gold 
B)  people believe it has value 
C)  it has intrinsic value 
D)  it is backed by silver 
E)  None of these answers are correct. B

Question 4

In dollar amounts, which of the following is the largest?

Accepted Answer

A)  MB 
B)  M2 
C)  M1 
D)  currency 
E)  demand deposits 
A)  MB 
B)  M2 
C)  M1 
D)  currency 
E)  demand deposits

Question 5

Economists often use a rate of inflation that is calculated using all goods EXCEPT vehicles and housing, because prices for these goods are relatively volatile.

Accepted Answer

A) True 
 B)False

Question 6

With unanticipated inflation:

Accepted Answer

A)  creditors are hurt unless they have an indexed contract, because they get less than they expected in real terms 
B)  debtors with an indexed contract are hurt, because they pay more than they contracted for in nominal terms 
C)  debtors with an unindexed contract lose, because they pay exactly what they contracted for in nominal terms 
D)  creditors with indexed contracts gain, because they receive more than they contracted for in nominal terms 
E)  debtors with an indexed contract are hurt, because they pay more than they contracted for in real terms 
A)  creditors are hurt unless they have an indexed contract, because they get less than they expected in real terms 
B)  debtors with an indexed contract are hurt, because they pay more than they contracted for in nominal terms 
C)  debtors with an unindexed contract lose, because they pay exactly what they contracted for in nominal terms 
D)  creditors with indexed contracts gain, because they receive more than they contracted for in nominal terms 
E)  debtors with an indexed contract are hurt, because they pay more than they contracted for in real terms

Question 7

The U.S. dollar is backed by the belief that it has value.

Accepted Answer

A) True 
 B)False

Question 8

Short-term treasury bills are the most liquid form of asset.

Accepted Answer

A) True 
 B)False

Question 9

Today, the Wendy's Junior Cheeseburger Deluxe is on the "Right Price Right Size" menu and is priced at $1.19. If the CPI in 1979 was 37.2 and the CPI in 2012 was 117.6, what is the price of a 2012 cheeseburger in 1979 dollars?

Accepted Answer

A)  $2.66 
B)  $1.07 
C)  $1.01 
D)  $0.38 
E)  $3.76 
A)  $2.66 
B)  $1.07 
C)  $1.01 
D)  $0.38 
E)  $3.76

Question 10

Alternative forms of money include:

Accepted Answer

A)  frequent flier miles 
B)  gift cards 
C)  debit cards 
D)  PayPal 
E)  All of these answers are correct. 
A)  frequent flier miles 
B)  gift cards 
C)  debit cards 
D)  PayPal 
E)  All of these answers are correct.

Question 11

The proposition that changes in money have no real effect on the economy and affect only prices is called:

Accepted Answer

A)  inflation 
B)  the classical dichotomy 
C)  the quantity equation 
D)  the neutrality of money 
E)  the quantity theory 
A)  inflation 
B)  the classical dichotomy 
C)  the quantity equation 
D)  the neutrality of money 
E)  the quantity theory

Question 12

The quote "Inflation is always and everywhere a fiscal phenomenon" is attributed to:

Accepted Answer

A)  Adam Smith 
B)  Thomas Sargent 
C)  Karl Marx 
D)  Alan Greenspan 
E)  David Ricardo 
A)  Adam Smith 
B)  Thomas Sargent 
C)  Karl Marx 
D)  Alan Greenspan 
E)  David Ricardo

Question 13

According to the quantity theory of money, the price level can be written as:

Accepted Answer

A)  $P _ { t } ^ { * } = \bar { M } _ { t }$ 
B)  $p _ { t } ^ { * } = \bar { M } _ { t } / \bar { Y } _ { t }$ 
C)  $p _ { t } ^ { * } = \left( \bar { M } _ { t } \bar { V } _ { t } \right) / \bar { Y } _ { t }$ 
D)  $P _ { t } ^ { * } = 1 / \bar { Y } _ { t }$ 
E)  $p _ { t } ^ { * } = \bar { Y } _ { t } \bar { M } _ { t } / \bar { V } _ { t }$ 
A)  $P _ { t } ^ { * } = \bar { M } _ { t }$ 
B)  $p _ { t } ^ { * } = \bar { M } _ { t } / \bar { Y } _ { t }$ 
C)  $p _ { t } ^ { * } = \left( \bar { M } _ { t } \bar { V } _ { t } \right) / \bar { Y } _ { t }$ 
D)  $P _ { t } ^ { * } = 1 / \bar { Y } _ { t }$ 
E)  $p _ { t } ^ { * } = \bar { Y } _ { t } \bar { M } _ { t } / \bar { V } _ { t }$

Question 14

According to the quantity theory of money, the price level is determined by the ratio of the effective quantity of money to the volume of goods.

Accepted Answer

A) True 
 B)False

Question 15

The quantity theory states that the nominal GDP is equal to:

Accepted Answer

A)  the real GDP 
B)  the number of dollars in circulation 
C)  the velocity of money 
D)  the effective amount of money used in purchases 
E)  velocity times real GDP 
A)  the real GDP 
B)  the number of dollars in circulation 
C)  the velocity of money 
D)  the effective amount of money used in purchases 
E)  velocity times real GDP

Question 16

The velocity of money is:

Accepted Answer

A)  how quickly money can be printed 
B)  how quickly individuals spend their income 
C)  the average number of times a dollar is used in a transaction per year 
D)  how many times individuals are paid per year 
E)  None of these answers are correct. 
A)  how quickly money can be printed 
B)  how quickly individuals spend their income 
C)  the average number of times a dollar is used in a transaction per year 
D)  how many times individuals are paid per year 
E)  None of these answers are correct.

Question 17

A risk a bank takes on by offering long-term fixed interest rate loans is:

Accepted Answer

A)  the loss of real returns due to anticipated inflation 
B)  the gain that could be made from offering short-term loans 
C)  the loss of real returns due to an unexpected inflation surprise 
D)  the gains that could have been made if the money were invested in an alternative asset 
E)  the loss of customers wanting flexible interest loans 
A)  the loss of real returns due to anticipated inflation 
B)  the gain that could be made from offering short-term loans 
C)  the loss of real returns due to an unexpected inflation surprise 
D)  the gains that could have been made if the money were invested in an alternative asset 
E)  the loss of customers wanting flexible interest loans

Question 18

What contributed to Reagan's defeat of Carter in the 1980 presidential election?

Accepted Answer

A)  double-digit inflation 
B)  the low rate of unemployment 
C)  the takeover of the U.S. embassy in Tehran, Iran 
D)  Billy Carter's beer 
E)  Margaret Thatcher 
A)  double-digit inflation 
B)  the low rate of unemployment 
C)  the takeover of the U.S. embassy in Tehran, Iran 
D)  Billy Carter's beer 
E)  Margaret Thatcher

Question 19

According to the classical dichotomy, in the long run there is:

Accepted Answer

A)  accelerating economic growth 
B)  perfect connectivity between the nominal and real sides of the economy 
C)  complete separation of the nominal and real sides of the economy 
D)  no growth after the economy reaches the steady state 
E)  zero inflation 
A)  accelerating economic growth 
B)  perfect connectivity between the nominal and real sides of the economy 
C)  complete separation of the nominal and real sides of the economy 
D)  no growth after the economy reaches the steady state 
E)  zero inflation

Question 20

Practically, the real interest rate is equal to:

Accepted Answer

A)  a savings account 
B)  the rate of return to long-term bonds 
C)  the marginal product of capital 
D)  the return to stock markets 
E)  the return to housing 
A)  a savings account 
B)  the rate of return to long-term bonds 
C)  the marginal product of capital 
D)  the return to stock markets 
E)  the return to housing

Exam 8: Inflation

Compared to the nominal interest rate, the real interest rate is:

When discussing inflation, we generally speak of it in terms of:

Fiat money has value because:

In dollar amounts, which of the following is the largest?

Economists often use a rate of inflation that is calculated using all goods EXCEPT vehicles and housing, because prices for these goods are relatively volatile.

With unanticipated inflation:

The U.S. dollar is backed by the belief that it has value.

Short-term treasury bills are the most liquid form of asset.

Today, the Wendy's Junior Cheeseburger Deluxe is on the "Right Price Right Size" menu and is priced at $1.19. If the CPI in 1979 was 37.2 and the CPI in 2012 was 117.6, what is the price of a 2012 cheeseburger in 1979 dollars?

Alternative forms of money include:

The proposition that changes in money have no real effect on the economy and affect only prices is called:

The quote "Inflation is always and everywhere a fiscal phenomenon" is attributed to:

According to the quantity theory of money, the price level can be written as:

According to the quantity theory of money, the price level is determined by the ratio of the effective quantity of money to the volume of goods.

The quantity theory states that the nominal GDP is equal to:

The velocity of money is:

A risk a bank takes on by offering long-term fixed interest rate loans is:

What contributed to Reagan's defeat of Carter in the 1980 presidential election?

According to the classical dichotomy, in the long run there is:

Practically, the real interest rate is equal to:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters