Question 1

All else equal, nominal wages would not likely increase if there is no inflation.

Accepted Answer

A) True 
 B)False

Question 2

As the result of unanticipated inflation, workers are better off while firms are worse off if the actual inflation rate

Accepted Answer

A)  is equal to the expected inflation rate. 
B)  exceeds the expected inflation rate. 
C)  is less than the expected inflation rate. 
D)  Neither firms nor workers are better off as the result of unanticipated inflation.

Question 3

Seignorage refers to the revenue raised through money creation.

Accepted Answer

A) True 
 B)False

Question 4

Increases in unanticipated inflation will impact employment levels, but once workers recognize higher inflation rates, they will incorporate them into their expectations of inflation. This will tend to cause

Accepted Answer

A)  unemployment to fall below the natural rate. 
B)  unemployment to return to its natural rate. 
C)  the natural rate of unemployment to rise. 
D)  the natural rate of unemployment to fall.

Question 5

The definition of a hyperinflation is having an inflation rate of 50 percent a year (or more).

Accepted Answer

A) True 
 B)False

Question 6

The quantity equation is expressed as

Accepted Answer

A)  MV = Py. 
B)  MP = Vy. 
C)  M/V = P/y. 
D)  M+V = P+y.

Question 7

If the velocity of money is 4 and the money supply is $16 trillion, then nominal GDP is

Accepted Answer

A)  $64 trillion. 
B)  $12 trillion. 
C)  $4 trillion. 
D)  $0.25 trillion.

Question 8

In addition to raising taxes, another way a budget deficit can be reduced or eliminated is by

Accepted Answer

A)  trying to increasing employment. 
B)  quickly reducing government spending. 
C)  increasing exports. 
D)  reducing foreign trade.

Question 9

When the public expects inflation, real and nominal rates of interest will be the same.

Accepted Answer

A) True 
 B)False

Exam 16: The Dynamics of Inflation and Unemployment

All else equal, nominal wages would not likely increase if there is no inflation.

As the result of unanticipated inflation, workers are better off while firms are worse off if the actual inflation rate

Seignorage refers to the revenue raised through money creation.

Increases in unanticipated inflation will impact employment levels, but once workers recognize higher inflation rates, they will incorporate them into their expectations of inflation. This will tend to cause

The definition of a hyperinflation is having an inflation rate of 50 percent a year (or more).

The quantity equation is expressed as

If the velocity of money is 4 and the money supply is $16 trillion, then nominal GDP is

In addition to raising taxes, another way a budget deficit can be reduced or eliminated is by

When the public expects inflation, real and nominal rates of interest will be the same.