Question 1

The inflation rate is calculated as the:

Accepted Answer

A)  overall price level. 
B)  change of the price level. 
C)  percent change in the price level. 
D)  difference in the price level. 
E)  percent change in output. 
A)  overall price level. 
B)  change of the price level. 
C)  percent change in the price level. 
D)  difference in the price level. 
E)  percent change in output. C

Question 2

You are the head of the central bank and you want to maintain 2 percent long-run inflation. Using the quantity theory of money, if real GDP growth is 4 percent and velocity is constant, you suggest a:

Accepted Answer

A)  4 percent money supply growth. 
B)  6 percent interest rate. 
C)  2 percent money supply growth. 
D)  0 percent money supply growth. 
E)  None of these answers is correct. 
A)  4 percent money supply growth. 
B)  6 percent interest rate. 
C)  2 percent money supply growth. 
D)  0 percent money supply growth. 
E)  None of these answers is correct. E

Question 3

By purchasing a fixed-rate 30-year mortgage, inflation risk is:

Accepted Answer

A)  eradicated. 
B)  spread equally to the borrower and lender. 
C)  passed from the lender to the borrower. 
D)  passed from the borrower to the lender. 
E)  borne by the government. 
A)  eradicated. 
B)  spread equally to the borrower and lender. 
C)  passed from the lender to the borrower. 
D)  passed from the borrower to the lender. 
E)  borne by the government. D

Question 4

Using the quantity equation, if Mt = $1,000, Pt = 1.1, and Vt = 11, then real GDP is:

Accepted Answer

A)  $100,000. 
B)  $0.01. 
C)  $10,000. 
D)  $909.19. 
E)  $826.45. 
A)  $100,000. 
B)  $0.01. 
C)  $10,000. 
D)  $909.19. 
E)  $826.45.

Question 5

According to the quantity theory of money, the price level is:

Accepted Answer

A)  exogenous. 
B)  determined by the money supply only. 
C)  determined by the ratio of the effective quantity of money to the volume of goods. 
D)  indeterminate in the long run. 
E)  determined by the volume of goods produced. 
A)  exogenous. 
B)  determined by the money supply only. 
C)  determined by the ratio of the effective quantity of money to the volume of goods. 
D)  indeterminate in the long run. 
E)  determined by the volume of goods produced.

Question 6

An implication of the quantity theory of money is that money growth rates have a less than one-to-one relationship with inflation.

Accepted Answer

A) True 
 B)False

Question 7

The velocity of money can be calculated from the quantity equation with:

Accepted Answer

A)  PtYt . 
B)  PtYt Mt  . 
C)  Mt /Pt Yt . 
D)  PtYt /Mt . 
E)  Mt . 
A)  PtYt . 
B)  PtYt Mt  . 
C)  Mt /Pt Yt . 
D)  PtYt /Mt . 
E)  Mt .

Question 8

Let R denote the real interest rate and i denote the nominal interest rate; these two interest rates are related by:

Accepted Answer

A)  i =  $\pi$. 
B)  i =R -  $\pi$. 
C)  i = R +  $\pi$. 
D)  i = R/ $\pi$. 
E)  None of these answers is correct. 
A)  i =  $\pi$. 
B)  i =R -  $\pi$. 
C)  i = R +  $\pi$. 
D)  i = R/ $\pi$. 
E)  None of these answers is correct.

Question 9

The figure below shows the three-month bond yield (solid line) and the inflation rate (dashed). Discuss what has happened to the real three-month bond yield over the period shown, 2003-2015. Are there any "unusual" occurrences over this period?Figure 8.3: Nominal Three-Month Yield and Inflation

Accepted Answer

To answer this we need the Fisher equati

Question 10

During times of high inflation, people hold ________ and must incur ________.

Accepted Answer

A)  less savings; lower interest rates 
B)  more money; lower interest rates 
C)  less money; higher shoe-leather costs 
D)  more savings; shoe-leather costs 
E)  less savings; higher transaction costs 
A)  less savings; lower interest rates 
B)  more money; lower interest rates 
C)  less money; higher shoe-leather costs 
D)  more savings; shoe-leather costs 
E)  less savings; higher transaction costs

Question 11

The measure of money that includes demand deposits and currency only is called:

Accepted Answer

A)  M0. 
B)  MZ. 
C)  M2. 
D)  M1. 
E)  MB. 
A)  M0. 
B)  MZ. 
C)  M2. 
D)  M1. 
E)  MB.

Question 12

The velocity of money is:

Accepted Answer

A)  another way of saying "monetizing the debt." 
B)  how quickly individuals spend their incomes. 
C)  a measure of liquidity. 
D)  how many times individuals are paid per year. 
E)  the average number of times a dollar is used in a transaction per year. 
A)  another way of saying "monetizing the debt." 
B)  how quickly individuals spend their incomes. 
C)  a measure of liquidity. 
D)  how many times individuals are paid per year. 
E)  the average number of times a dollar is used in a transaction per year.

Question 13

When inflation is high and people are forced to make more trips to the bank, this is often referred to as:

Accepted Answer

A)  marginal social cost. 
B)  hyperinflation. 
C)  the double coincidence of wants. 
D)  the neutrality of money. 
E)  shoe-leather costs. 
A)  marginal social cost. 
B)  hyperinflation. 
C)  the double coincidence of wants. 
D)  the neutrality of money. 
E)  shoe-leather costs.

Question 14

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

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 15

Using the quantity equation, if Mt = $1,000, Pt = 1.1, and Yt = 100,000, then the velocity of money is:

Accepted Answer

A)  100,000. 
B)  0.09. 
C)  110. 
D)  9.09. 
E)  0.11. 
A)  100,000. 
B)  0.09. 
C)  110. 
D)  9.09. 
E)  0.11.

Question 16

If some goods' prices adjust more quickly than others during a period of high inflation, there is:

Accepted Answer

A)  a perfect short-run allocation of resources. 
B)  a short-run misallocation of resources. 
C)  no inflation. 
D)  a hyperinflation. 
E)  a deflation. 
A)  a perfect short-run allocation of resources. 
B)  a short-run misallocation of resources. 
C)  no inflation. 
D)  a hyperinflation. 
E)  a deflation.

Question 17

Figure 8.1: Money Growth and Inflation in the United States by Decade  
-The data presented in Figure 8.1 confirm that the relationship between inflation and money growth is ________, as suggested by ________.

Accepted Answer

A)  positive; the Fisher equation 
B)  positive; money neutrality 
C)  positive; the quantity theory of money 
D)  negative; the quantity theory of money 
E)  None of these answers is correct. 
A)  positive; the Fisher equation 
B)  positive; money neutrality 
C)  positive; the quantity theory of money 
D)  negative; the quantity theory of money 
E)  None of these answers is correct.

Question 18

The velocity of money is defined as the average number of times a dollar is used in a transaction over the course of a year.

Accepted Answer

A) True 
 B)False

Question 19

If income tax rates are based on nominal income, as inflation increases, taxpayers will see:

Accepted Answer

A)  an increase in their real incomes. 
B)  their taxes fall as their incomes fall. 
C)  their taxes rise even though their real incomes are falling. 
D)  an increase in the nominal income. 
E)  their taxes fall even though their real incomes are rising. 
A)  an increase in their real incomes. 
B)  their taxes fall as their incomes fall. 
C)  their taxes rise even though their real incomes are falling. 
D)  an increase in the nominal income. 
E)  their taxes fall even though their real incomes are rising.

Question 20

According to the quantity equation, the cure for hyperinflation is:

Accepted Answer

A)  higher taxes. 
B)  reducing government spending. 
C)  reducing money growth. 
D)  All of these answers are correct. 
E)  None of these answers is correct. 
A)  higher taxes. 
B)  reducing government spending. 
C)  reducing money growth. 
D)  All of these answers are correct. 
E)  None of these answers is correct.

Exam 8: Inflation

The inflation rate is calculated as the:

You are the head of the central bank and you want to maintain 2 percent long-run inflation. Using the quantity theory of money, if real GDP growth is 4 percent and velocity is constant, you suggest a:

By purchasing a fixed-rate 30-year mortgage, inflation risk is:

Using the quantity equation, if Mt = $1,000, Pt = 1.1, and Vt = 11, then real GDP is:

According to the quantity theory of money, the price level is:

An implication of the quantity theory of money is that money growth rates have a less than one-to-one relationship with inflation.

The velocity of money can be calculated from the quantity equation with:

Let R denote the real interest rate and i denote the nominal interest rate; these two interest rates are related by:

The figure below shows the three-month bond yield (solid line) and the inflation rate (dashed). Discuss what has happened to the real three-month bond yield over the period shown, 2003-2015. Are there any "unusual" occurrences over this period?Figure 8.3: Nominal Three-Month Yield and Inflation

During times of high inflation, people hold ________ and must incur ________.

The measure of money that includes demand deposits and currency only is called:

The velocity of money is:

When inflation is high and people are forced to make more trips to the bank, this is often referred to as:

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

Using the quantity equation, if Mt = $1,000, Pt = 1.1, and Yt = 100,000, then the velocity of money is:

If some goods' prices adjust more quickly than others during a period of high inflation, there is:

Figure 8.1: Money Growth and Inflation in the United States by Decade -The data presented in Figure 8.1 confirm that the relationship between inflation and money growth is ________, as suggested by ________.

The velocity of money is defined as the average number of times a dollar is used in a transaction over the course of a year.

If income tax rates are based on nominal income, as inflation increases, taxpayers will see:

According to the quantity equation, the cure for hyperinflation is:

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

Using the quantity equation, if M_t = $1,000, P_t = 1.1, and V_t= 11, then real GDP is:

During times of high inflation, people hold and must incur .

Using the quantity equation, if M_t = $1,000, P_t = 1.1, and Y_t = 100,000, then the velocity of money is:

Figure 8.1: Money Growth and Inflation in the United States by Decade -The data presented in Figure 8.1 confirm that the relationship between inflation and money growth is , as suggested by .