Question 1

Which country is correctly matched with its 2009 inflation rate?

Accepted Answer

A)  9 percent inflation in the United States. 
B)  3.6 percent inflation in Russia. 
C)  59 percent inflation in Venezuela. 
D)  9.3 percent inflation in India. 
A)  9 percent inflation in the United States. 
B)  3.6 percent inflation in Russia. 
C)  59 percent inflation in Venezuela. 
D)  9.3 percent inflation in India. D

Question 2

For a given level of money and real GDP, an increase in velocity would lead to an increase in the price level.

Accepted Answer

A) True 
 B)False  True

Question 3

If the economy unexpectedly went from inflation to deflation,

Accepted Answer

A)  both debtors and creditors would have reduced real wealth. 
B)  both debtors and creditors would have increased real wealth. 
C)  debtors would gain at the expense of creditors. 
D)  creditors would gain at the expense of debtors. 
A)  both debtors and creditors would have reduced real wealth. 
B)  both debtors and creditors would have increased real wealth. 
C)  debtors would gain at the expense of creditors. 
D)  creditors would gain at the expense of debtors. D

Question 4

If a country experienced deflation, then

Accepted Answer

A)  the nominal interest rate would be greater than the real interest rate. 
B)  the real interest rate would be greater than the nominal interest rate. 
C)  the real interest rate would equal the nominal interest rate. 
D)  nominal GDP would be greater than the money supply. 
A)  the nominal interest rate would be greater than the real interest rate. 
B)  the real interest rate would be greater than the nominal interest rate. 
C)  the real interest rate would equal the nominal interest rate. 
D)  nominal GDP would be greater than the money supply.

Question 5

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

Accepted Answer

A) True 
 B)False

Question 6

You earn a nominal return of 6% on your savings and the tax rate is 20%. If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate of return?

Accepted Answer

The answer of You earn a nominal return of 6%...

Question 7

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

Accepted Answer

Open marke

Question 8

The evidence from hyperinflations indicates that money growth and inflation

Accepted Answer

A)  are positively related, which is consistent with the quantity theory of money. 
B)  are positively related, which is not consistent with the quantity theory of money. 
C)  are not related in a discernible fashion, which is consistent with the quantity theory of money. 
D)  are not related in a discernible fashion, which is not consistent with the quantity theory of money. 
A)  are positively related, which is consistent with the quantity theory of money. 
B)  are positively related, which is not consistent with the quantity theory of money. 
C)  are not related in a discernible fashion, which is consistent with the quantity theory of money. 
D)  are not related in a discernible fashion, which is not consistent with the quantity theory of money.

Question 9

Suppose the Fed sells government bonds. Use a graph of the money market to show what this does to the value of money.

Accepted Answer

@#IMG-DLM& When the Fed sells government bonds, th

Question 10

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

Accepted Answer

A)  velocity concept. 
B)  Fisher effect. 
C)  classical dichotomy. 
D)  Mankiw effect. 
A)  velocity concept. 
B)  Fisher effect. 
C)  classical dichotomy. 
D)  Mankiw effect.

Question 11

The story The Wizard of Oz can be interpreted as an allegory about U.S. monetary policy in the late 19th century.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Accepted Answer

A)  inflation averaged 8% per year and the real rate of return was 9%. 
B)  inflation averaged 11% per year and the real rate of return was 17%. 
C)  inflation averaged 5% per year and the real rate of return was 4%. 
D)  inflation averaged 1% per year and the real rate of return was 6%. 
A)  inflation averaged 8% per year and the real rate of return was 9%. 
B)  inflation averaged 11% per year and the real rate of return was 17%. 
C)  inflation averaged 5% per year and the real rate of return was 4%. 
D)  inflation averaged 1% per year and the real rate of return was 6%.

Question 13

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Accepted Answer

He was expecting it

Question 14

Over the past 80 years, the overall price level in the U.S. has experienced an)

Accepted Answer

A)  4-fold increase. 
B)  10-fold increase. 
C)  13-fold increase. 
D)  17-fold increase. 
A)  4-fold increase. 
B)  10-fold increase. 
C)  13-fold increase. 
D)  17-fold increase.

Question 15

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

Accepted Answer

A)  40 percent. 
B)  33.3 percent. 
C)  25 percent. 
D)  50 percent. 
A)  40 percent. 
B)  33.3 percent. 
C)  25 percent. 
D)  50 percent.

Question 16

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.

Question 17

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 18

In the U.S., people are required to pay taxes on

Accepted Answer

A)  nominal interest earnings, irrespective of their real interest earnings. 
B)  real interest earnings, irrespective of their nominal interest earnings. 
C)  real capital gains, irrespective of their nominal capital gains. 
D)  All of the above are correct. 
A)  nominal interest earnings, irrespective of their real interest earnings. 
B)  real interest earnings, irrespective of their nominal interest earnings. 
C)  real capital gains, irrespective of their nominal capital gains. 
D)  All of the above are correct.

Question 19

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.

Question 20

Suppose that velocity rises while the money supply stays the same. It follows that

Accepted Answer

A)  P x Y must rise. 
B)  P x Y must fall. 
C)  P x Y must be unchanged. 
D)  the effects on P x Y are uncertain. 
A)  P x Y must rise. 
B)  P x Y must fall. 
C)  P x Y must be unchanged. 
D)  the effects on P x Y are uncertain.

Which country is correctly matched with its 2009 inflation rate?

For a given level of money and real GDP, an increase in velocity would lead to an increase in the price level.

If the economy unexpectedly went from inflation to deflation,

If a country experienced deflation, then

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

You earn a nominal return of 6% on your savings and the tax rate is 20%. If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate of return?

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

The evidence from hyperinflations indicates that money growth and inflation

Suppose the Fed sells government bonds. Use a graph of the money market to show what this does to the value of money.

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

The story The Wizard of Oz can be interpreted as an allegory about U.S. monetary policy in the late 19th century.

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Over the past 80 years, the overall price level in the U.S. has experienced an)

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

The value of money rises as the price level

In the U.S., people are required to pay taxes on

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

Suppose that velocity rises while the money supply stays the same. It follows that

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 12: Money Growth and Inflation

Which country is correctly matched with its 2009 inflation rate?

For a given level of money and real GDP, an increase in velocity would lead to an increase in the price level.

If the economy unexpectedly went from inflation to deflation,

If a country experienced deflation, then

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

You earn a nominal return of 6% on your savings and the tax rate is 20%. If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate of return?

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

The evidence from hyperinflations indicates that money growth and inflation

Suppose the Fed sells government bonds. Use a graph of the money market to show what this does to the value of money.

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

The story The Wizard of Oz can be interpreted as an allegory about U.S. monetary policy in the late 19th century.

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the Quantity Theory,

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

Over the past 80 years, the overall price level in the U.S. has experienced an)

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

The value of money rises as the price level

In the U.S., people are required to pay taxes on

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

Suppose that velocity rises while the money supply stays the same. It follows that

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters