Question 1

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)  either a rise in output or a rise in the rate at which money changes hands.
B)  either a rise in output or a fall in the rate at which money changes hands.
C)  either a fall in output or a rise in the rate at which money changes hands.
D)  either a fall in output or a fall in the rate at which money changes hands.E) None of the above
F) A) and C)

Question 2

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Accepted Answer

A)  two percent and prices fell one percent.
B)  two percent and prices rose one percent.
C)  three percent and prices rose one percent.
D)  three percent and prices fell one percent.E) All of the above
F) B) and C)

Question 3

If inflation is less than expected, who is wealth redistributed to?

Accepted Answer

The answer of If inflation is less than expected, who...

Question 4

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) B) and D)

Question 5

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Accepted Answer

A)  Inflation is 3 percent; the tax rate is 15 percent.
B)  Inflation is 2 percent; the tax rate is 40 percent.
C)  Inflation is 1 percent; the tax rate is 50 percent.
D)  The after-tax real interest rate is the same for all of the above.E) A) and B)
F) A) and C)

Question 6

For a given real interest rate, a decrease in the inflation rate would

Accepted Answer

A)  decrease the after-tax real interest rate and so decrease saving.
B)  decrease the after-tax real interest rate and so increase saving.
C)  increase the after-tax real interest rate and so decrease saving.
D)  increase the after-tax real interest rate and so increase saving.E) All of the above
F) None of the above

Question 7

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Accepted Answer

A)  Inflation is 2.5 percent; the tax rate is 25 percent.
B)  Inflation is 3 percent; the tax rate is 20 percent.
C)  Inflation is 2 percent; the tax rate is 30 percent.
D)  The after-tax real interest rate is the same for all of the above.E) A) and B)
F) A) and C)

Question 8

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Accepted Answer

The answer of In the early 1920s U.S. consumer prices...

Question 9

Steve purchases some land for $30,000. He maintains it, but makes no improvements to it. One year later he sells it for $32,000. Stephanie puts $30,000 in a savings account that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the 35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain and who had the higher after-tax real gain?

Accepted Answer

A)  Steve had both the higher before-tax real gain and the higher after-tax real gain.
B)  Steve had the higher before-tax real gain but Stephanie had the higher after-tax real gain.
C)  Stephanie had the higher before-tax real gain but Steve had the higher after-tax real gain.
D)  Stephanie had both the higher before-tax real gain and the higher after-tax real gain.E) C) and D)
F) B) and D)

Question 10

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) A) and D)
F) B) and D)

Question 11

Which of the following statements concerning the history of U.S. inflation is not correct?

Accepted Answer

A)  Prices rose at an average annual rate of about 3.6 percent over the last 80 years.
B)  There was about a 17-fold increase in the price level over the last 80 years.
C)  Inflation in the 1970s was below the average over the last 80 years.
D)  The United States has experienced periods of deflation.E) All of the above
F) B) and C)

Question 12

Hyperinflation can be explained by

Accepted Answer

A)  ​the market for loanable funds.
B)  ​the quantity theory of money.
C)  the velocity theory of money.
D)  ​the market for federal funds.E) None of the above
F) B) and C)

Question 13

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  4-fold increase.
B)  10-fold increase.
C)  13-fold increase.
D)  17-fold increase.E) B) and C)
F) None of the above

Question 15

In the last part of the 1800's

Accepted Answer

A)  deflation made it harder for farmers to pay off their debt.
B)  deflation made it easier for farmers to pay off their debt.
C)  inflation made it harder for farmers to pay off their debt.
D)  inflation made it easier for farmers to pay off their debt.E) A) and C)
F) B) and D)

Question 16

In which case is velocity the highest?

Accepted Answer

A)  the price level equals 4, the money supply equals 5,000, and output equals 20,000.
B)  the price level equals 4, the money supply equals 20,000 and output equals 5,000.
C)  the price level equals 2, the money supply equals 5,000, and output equals 20,000.
D)  the price level equals 2, the money supply equals 20,000 and output equals 5,000.E) C) and D)
F) B) and D)

Question 17

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Accepted Answer

A)  2,000.
B)  200,000.
C)  12,500.
D)  32,000.E) A) and D)
F) C) and D)

Question 18

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

Accepted Answer

A)  8 percent
B)  2 percent
C)  15 percent
D)  1.7 percentE) A) and D)
F) B) and C)

Question 19

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to _____ in the long run.

Accepted Answer

The answer of Suppose the rate of inflation rate is...

Question 20

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Accepted Answer

A)  2.4 percent.
B)  3.5 percent.
C)  8.5 percent.
D)  15 percent.E) All of the above
F) C) and D)

Exam 30: Money Growth and Inflation

If inflation is less than expected, who is wealth redistributed to?

Correct Answer
verified

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Correct Answer
verified

In the last part of the 1800's

Correct Answer
verified

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

Correct Answer
verified

In the long run, money demand and money supply determine

Correct Answer
verified

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Correct Answer
verified

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

Correct Answer
verified

For a given real interest rate, a decrease in the inflation rate would

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

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

Correct Answer
verified

Correct Answer
verified

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Correct Answer
verified

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to _____ in the long run.

Correct Answer
verified

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct Answer
verified

In which case is velocity the highest?

Correct Answer
verified

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Correct Answer
verified

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Correct Answer
verified

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Correct Answer
verified

Which of the following statements concerning the history of U.S. inflation is not correct?

Correct Answer
verified

Hyperinflation can be explained by

Correct Answer
verified

Exam 30: Money Growth and Inflation

If inflation is less than expected, who is wealth redistributed to?

Correct AnswerverifiedShow Answer

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

Correct AnswerverifiedShow Answer

In the last part of the 1800's

Correct AnswerverifiedShow Answer

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Correct AnswerverifiedShow Answer

In the long run, money demand and money supply determine

Correct AnswerverifiedShow Answer

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a given real interest rate, a decrease in the inflation rate would

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

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Correct AnswerverifiedShow Answer

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to _____ in the long run.

Correct AnswerverifiedShow Answer

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

Correct AnswerverifiedShow Answer

In which case is velocity the highest?

Correct AnswerverifiedShow Answer

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

Correct AnswerverifiedShow Answer

Which of the following statements concerning the history of U.S. inflation is not correct?

Correct AnswerverifiedShow Answer

Hyperinflation can be explained by

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified