Question 1

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Accepted Answer

A)   the price level would fall, so the value of money would fall.
B)   the price level would fall, so the value of money would rise.
C)   the price level would rise, so the value of money would fall.
D)   the price level would rise, so the value of money would rise.E) A) and B)
F) A) and C)

Question 2

According to the classical dichotomy, which of the following increases when the money supply increases?

Accepted Answer

A)   the real interest rate
B)   real GDP
C)   the real wage
D)   None of the above increases.E) B) and D)
F) B) and C)

Question 3

Figure 12-1
 1 to MS2, A)  the demand for goods and services decreases. B)  the economy's ability to produce goods and services increases. C)  the equilibrium price level decreases. D)  None of the above is correct. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 12-1. When the money supply curve shifts from MS1 to MS2,

Accepted Answer

A)   the demand for goods and services decreases.
B)   the economy's ability to produce goods and services increases.
C)   the equilibrium price level decreases.
D)   None of the above is correct.E) A) and C)
F) None of the above

Question 4

If there is inflation, then a firm that has kept its price fixed for some time will have a

Accepted Answer

A)   high relative price. Relative-price variability rises as the inflation rate rises.
B)   high relative price. Relative-price variability falls as the inflation rate rises.
C)   low relative price. Relative-price variability rises as the inflation rate rises.
D)   low relative price. Relative-price variability falls as the inflation rate rises.E) None of the above
F) B) and D)

Question 5

Figure 12-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
 2. At the end of 2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? A)  -43 percent B)  -57 percent C)  57 percent D)  75 percent " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 12-2. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)   -43 percent
B)   -57 percent
C)   57 percent
D)   75 percentE) None of the above
F) B) and C)

Question 6

According to the classical dichotomy, which of the following is influenced by monetary factors?

Accepted Answer

A)   the real wage
B)   the real interest rate
C)   the nominal wage
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 7

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.E) All of the above
F) A) and C)

Question 8

You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. Before taxes, you experienced

Accepted Answer

A)   both a nominal gain and a real gain, and you paid taxes on the nominal gain.
B)   both a nominal gain and a real gain, and you paid taxes only on the real gain.
C)   a nominal gain and a real loss, and you paid taxes on the nominal gain.
D)   a nominal gain and a real loss, and you paid no taxes on the transaction.E) B) and D)
F) A) and D)

Question 9

Shoeleather costs and menu costs are both costs of anticipated inflation.

Accepted Answer

A) True 
 B)False

Question 10

If M = 3,000, P = 2, and Y = 12,000, what is velocity?

Accepted Answer

A)   1/2
B)   2
C)   4
D)   8E) None of the above
F) A) and C)

Question 11

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.E) A) and D)
F) B) and D)

Question 12

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

Accepted Answer

A)   The $750 is a nominal variable. The 300 cups of coffee is a real variable.
B)   The $750 is a real variable. The 300 cups of coffee is a nominal variable.
C)   Both the $750 and the 300 cups of coffee are nominal variables.
D)   Both the $750 and the 300 cups of coffee are real variables.E) C) and D)
F) A) and C)

Question 13

Open-market purchases by the Fed make the money supply

Accepted Answer

A)   increase, which makes the value of money increase.
B)   increase, which makes the value of money decrease.
C)   decrease, which makes the value of money decrease.
D)   decrease, which makes the value of money increase.E) None of the above
F) All of the above

Question 14

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Accepted Answer

A)   the price level and nominal wages
B)   the price level, but not the nominal wage
C)   the nominal wage, but not the price level
D)   neither the nominal wage nor the price levelE) A) and B)
F) All of the above

Question 15

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.E) C) and D)
F) B) and D)

Question 16

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Accepted Answer

When the money supply increases, there i...

Question 17

Between 1880 and 1886, prices that were

Accepted Answer

A)   lower than expected transferred wealth from creditors to debtors.
B)   lower than expected transferred wealth from debtors to creditors.
C)   higher than expected transferred wealth from creditors to debtors.
D)   higher than expected transferred wealth from debtors to creditors.E) All of the above
F) C) and D)

Question 18

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Accepted Answer

A) True 
 B)False

Question 19

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Accepted Answer

A) True 
 B)False

Question 20

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

Accepted Answer

A) True 
 B)False

Exam 12: Money Growth and Inflation

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Correct Answer
verified

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Correct Answer
verified

Shoeleather costs and menu costs are both costs of anticipated inflation.

Correct Answer
verified

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

Correct Answer
verified

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

If there is inflation, then a firm that has kept its price fixed for some time will have a

Correct Answer
verified

According to the classical dichotomy, which of the following increases when the money supply increases?

Correct Answer
verified

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Correct Answer
verified
When the money supply increases, there i...
View Answer

You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. Before taxes, you experienced

Correct Answer
verified

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

Correct Answer
verified

Figure 12-1 -Refer to Figure 12-1. When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
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If M = 3,000, P = 2, and Y = 12,000, what is velocity?

Correct Answer
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On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

Correct Answer
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According to the classical dichotomy, which of the following is influenced by monetary factors?

Correct Answer
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Correct Answer
verified

Between 1880 and 1886, prices that were

Correct Answer
verified

Open-market purchases by the Fed make the money supply

Correct Answer
verified

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Correct Answer
verified

Exam 12: Money Growth and Inflation

When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right.

Correct AnswerverifiedShow Answer

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Correct AnswerverifiedShow Answer

Shoeleather costs and menu costs are both costs of anticipated inflation.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

If there is inflation, then a firm that has kept its price fixed for some time will have a

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following increases when the money supply increases?

Correct AnswerverifiedShow Answer

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Correct AnswerverifiedWhen the money supply increases, there i...View AnswerShow Answer

You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. Before taxes, you experienced

Correct AnswerverifiedShow Answer

In the long run, an increase in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate.

Correct AnswerverifiedShow Answer

Figure 12-1 -Refer to Figure 12-1. When the money supply curve shifts from MS1 to MS2,

Correct AnswerverifiedShow Answer

If M = 3,000, P = 2, and Y = 12,000, what is velocity?

Correct AnswerverifiedShow Answer

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is influenced by monetary factors?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Between 1880 and 1886, prices that were

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed make the money supply

Correct AnswerverifiedShow Answer

According to the classical dichotomy, when the money supply doubles, which of the following also doubles?

Correct AnswerverifiedShow Answer

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When the money supply increases, there i...
View Answer

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Figure 12-1 -Refer to Figure 12-1. When the money supply curve shifts from MS₁ to MS₂,

Correct Answer
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