Question 1

The inflation tax

Accepted Answer

A)   is an alternative to income taxes and government borrowing.
B)   taxes most those who hold the most money.
C)   is the revenue created when the government prints money.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 2

If V and M are constant and Y doubles, the quantity equation implies that the price level

Accepted Answer

A)   falls to half its original level.
B)   does not change.
C)   doubles.
D)   more than doubles.E) None of the above
F) All of the above

Question 3

Banks advertise

Accepted Answer

A)   the real interest rate, which is how fast the dollar value of savings grows.
B)   the real interest rate, which is how fast the purchasing power of savings grows.
C)   the nominal interest rate, which is how fast the dollar value of savings grows.
D)   the nominal interest rate, which is how fast the purchasing power of savings grows.E) C) and D)
F) A) and B)

Question 4

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Accepted Answer

A)   the price level will rise.
B)   the value of money will rise.
C)   money demand will shift leftward.
D)   money demand will shift rightward.E) All of the above
F) A) and C)

Question 5

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Accepted Answer

Inflation has raised the general price l...

Question 6

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-2. 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) C) and D)
F) None of the above

Question 7

Economists agree that

Accepted Answer

A)   neither high inflation nor moderate inflation is very costly.
B)   both high and moderate inflation are quite costly.
C)   high inflation is costly, but they disagree about the costs of moderate inflation.
D)   moderate inflation is as costly as high inflation.E) A) and B)
F) A) and C)

Question 8

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?

Accepted Answer

Typically, the government in countries t...

Question 9

The inflation tax

Accepted Answer

A)   transfers wealth from the government to households.
B)   is the increase in real income taxes due to lack of indexation in income tax rules.
C)   is a tax on everyone who holds money.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 10

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after­tax real rate of interest

Accepted Answer

A)   will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
B)   will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.
C)   will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent.
D)   will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.E) B) and D)
F) B) and C)

Question 11

In the long run, money demand and money supply determine

Accepted Answer

A)   the value of money and the real interest rate.
B)   the value of money but not the real interest rate.
C)   the real interest rate but not the value of money.
D)   neither the value of money nor the real interest rate.E) None of the above
F) A) and D)

Question 12

Serena purchased 10 shares of GLC, Inc. stock for $200 per share; one year later she sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0 to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Serena pay on her gain?

Accepted Answer

A)   $90
B)   b. $95
C)   c. $100
D)   None of the above is correct.E) B) and D)
F) A) and C)

Question 13

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Accepted Answer

A)   $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
B)   $120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.
C)   15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
D)   15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.E) None of the above
F) All of the above

Question 14

In order to maintain stable prices, a central bank must

Accepted Answer

A)   maintain low interest rates.
B)   keep unemployment low.
C)   tightly control the money supply.
D)   sell indexed bonds.E) A) and B)
F) None of the above

Question 15

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then

Accepted Answer

A)   when the money market is in equilibrium, one dollar purchases one-half of a basket of goods and services.
B)   when the money market is in equilibrium, one unit of goods and services sells for 2 dollars.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.375.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 16

Inflation is costly only if it is unanticipated.

Accepted Answer

A) True 
 B)False

Question 17

The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.

Accepted Answer

A) True 
 B)False

Question 18

Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods.

Accepted Answer

A)   The nominal interest rate was 10 percent and the inflation rate was 6 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 2 percent.
C)   The nominal interest rate was 4 percent and the inflation rate was 2 percent.
D)   The nominal interest rate was 10 percent and the inflation rate was 4 percent.E) B) and C)
F) A) and D)

Question 19

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Accepted Answer

The answer of During hyperinflations, people desire to hold less...

Question 20

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

Accepted Answer

A)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected.
B)   transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected.
C)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected.
D)   transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.E) A) and C)
F) All of the above

Exam 22: Money Growth and Inflation

Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods.

Correct Answer
verified

Banks advertise

Correct Answer
verified

The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.

Correct Answer
verified

The inflation tax

Correct Answer
verified

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?

Correct Answer
verified
Typically, the government in countries t...
View Answer

Economists agree that

Correct Answer
verified

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Correct Answer
verified
Inflation has raised the general price l...
View Answer

Correct Answer
verified

If V and M are constant and Y doubles, the quantity equation implies that the price level

Correct Answer
verified

The inflation tax

Correct Answer
verified

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Correct Answer
verified

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Correct Answer
verified

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

Correct Answer
verified

In the long run, money demand and money supply determine

Correct Answer
verified

In order to maintain stable prices, a central bank must

Correct Answer
verified

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's aftertax real rate of interest

Correct Answer
verified

Inflation is costly only if it is unanticipated.

Correct Answer
verified

Correct Answer
verified

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then

Correct Answer
verified

Exam 22: Money Growth and Inflation

Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods.

Correct AnswerverifiedShow Answer

Banks advertise

Correct AnswerverifiedShow Answer

The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.

Correct AnswerverifiedShow Answer

The inflation tax

Correct AnswerverifiedShow Answer

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable. So why have there been hyperinflations and how have they been ended?

Correct AnswerverifiedTypically, the government in countries t...View AnswerShow Answer

Economists agree that

Correct AnswerverifiedShow Answer

Wages and prices are many times higher today than they were 30 years ago, yet people do not work a lot more hours or buy fewer goods. How can this be?

Correct AnswerverifiedInflation has raised the general price l...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If V and M are constant and Y doubles, the quantity equation implies that the price level

Correct AnswerverifiedShow Answer

The inflation tax

Correct AnswerverifiedShow Answer

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as .

Correct AnswerverifiedShow Answer

Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,

Correct AnswerverifiedShow Answer

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

Correct AnswerverifiedShow Answer

In the long run, money demand and money supply determine

Correct AnswerverifiedShow Answer

In order to maintain stable prices, a central bank must

Correct AnswerverifiedShow Answer

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after­tax real rate of interest

Correct AnswerverifiedShow Answer

Inflation is costly only if it is unanticipated.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Typically, the government in countries t...
View Answer

Correct Answer
verified

Correct Answer
verified
Inflation has raised the general price l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's aftertax real rate of interest

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified