Question 1

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Accepted Answer

That V is ...

Question 2

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Accepted Answer

P = MV/Y. With the numbers giv...

Question 3

The source of hyperinflations is primarily

Accepted Answer

A)  lower output growth.
B)  continuing declines in velocity.
C)  increases in money-supply growth.
D)  continuing increases in money demand.

Question 4

Higher inflation makes relative prices

Accepted Answer

A)  more variable, making it more likely that resources will be allocated to their best use.
B)  more variable, making it less likely that resources will be allocated to their best use.
C)  less variable, making it more likely that resources will be allocated to their best use.
D)  less variable, making it less likely that resources will be allocated to their best use.

Question 5

Shoeleather cost refers to

Accepted Answer

A)  the cost of more frequent price changes induced by higher inflation.
B)  the distortion in resource allocation created by distortions in relative prices due to inflation.
C)  resources used to maintain lower money holdings when inflation is high.
D)  the tendency to expend more effort searching for the lowest price when inflation is high.

Question 6

The increase in the overall level of prices is known as _____.

Accepted Answer

The answer of The increase in the overall level of...

Question 7

High and unexpected inflation has a greater cost

Accepted Answer

A)  for those who borrow than for those who save.
B)  for those who hold a little money than for those who hold a lot of money.
C)  for those whose wages increase by as much as inflation than for those who are paid a fixed nominal wage.
D)  for savers in high income tax brackets than for savers in low income tax brackets.

Question 8

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. 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.

Question 9

Which of the following did NOT happen during the late 19th century in the U.S.?

Accepted Answer

A)  Falling crop prices reduced farmers' incomes
B)  From 1880 to 1896, the price level fell by 23 percent
C)  Farmers lobbied for government policies to reduce inflation
D)  ​Farmers had reduced ability to pay off debts

Question 10

High and unexpected inflation has a greater cost

Accepted Answer

A)  for those who borrow than for those who save.
B)  for those who hold a little money than for those who hold a lot of money.
C)  for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation.
D)  All of the above are correct.

Question 11

Which of the following is correct?

Accepted Answer

A)  The Continental Congress used the inflation tax to help finance the American Revolution.
B)  The inflation is today a principal source of revenue for the U.S. government.
C)  There is no way a person can avoid the inflation tax.
D)  Governments can only raise revenues through taxation.

Question 12

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.

Question 13

When inflation rises people will

Accepted Answer

A)  demand more money so the price level rises.
B)  demand more money so the price level falls.
C)  demand less money so the price level rises.
D)  demand less money so the price level falls.

Question 14

Other things the same, an increase in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls, so the price level rises.
B)  the rate at which money changes hands falls, so the price level falls.
C)  the rate at which money changes hands rises, so the price level rises.
D)  the rate at which money changes hands rises, so the price level falls.

Question 15

The country of Robinya has a tax system identical to that of the United States. Suppose someone in Robinya bought a parcel of land for 10,000 deera (the local currency)  in 1970 when the price index equaled 100. In 2010, the person sold the land for 100,000 deera, and the price index equaled 500. The tax rate on nominal capital gains was 20 percent. Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)  -20 percent
B)  20 percent
C)  42 percent
D)  64 percent

Question 16

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. What quantity is measured along the horizontal axis?

Accepted Answer

A)  the price level
B)  the real interest rate
C)  the value of money
D)  the quantity of money

Question 17

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Accepted Answer

A)  $4,000.
B)  $2,250.
C)  $250.
D)  $36,000.

Question 18

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Accepted Answer

A)  The $80 is a real variable. The quantity of shoes is a nominal variable.
B)  The $80 is a nominal variable. The quantity of shoes is a real variable.
C)  Both the $80 and the quantity of shoes are nominal variables.
D)  Both the $80 and the quantity of shoes are real variables.

Question 19

The idea that firms incur actual costs when they change prices is known as _____. Firms in countries with lower inflation rates will change price _____ frequently compared to those countries where inflation is higher.

Accepted Answer

The answer of The idea that firms incur actual costs...

Question 20

Which of the following is correct?

Accepted Answer

A)  If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
B)  If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
C)  If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right.
D)  If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.

Exam 30: Money Growth and Inflation

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Correct Answer
verified
That V is ...
View Answer

The source of hyperinflations is primarily

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. What quantity is measured along the horizontal axis?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

High and unexpected inflation has a greater cost

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Correct Answer
verified
P = MV/Y. With the numbers giv...
View Answer

The idea that firms incur actual costs when they change prices is known as _. Firms in countries with lower inflation rates will change price _ frequently compared to those countries where inflation is higher.

Correct Answer
verified

Higher inflation makes relative prices

Correct Answer
verified

Which of the following did NOT happen during the late 19th century in the U.S.?

Correct Answer
verified

High and unexpected inflation has a greater cost

Correct Answer
verified

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Correct Answer
verified

Correct Answer
verified

Other things the same, an increase in velocity means that

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

The increase in the overall level of prices is known as _____.

Correct Answer
verified

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct Answer
verified

Shoeleather cost refers to

Correct Answer
verified

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Correct Answer
verified

When inflation rises people will

Correct Answer
verified

Exam 30: Money Growth and Inflation

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

Correct AnswerverifiedThat V is ...View AnswerShow Answer

The source of hyperinflations is primarily

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. What quantity is measured along the horizontal axis?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

High and unexpected inflation has a greater cost

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Correct AnswerverifiedP = MV/Y. With the numbers giv...View AnswerShow Answer

The idea that firms incur actual costs when they change prices is known as _____. Firms in countries with lower inflation rates will change price _____ frequently compared to those countries where inflation is higher.

Correct AnswerverifiedShow Answer

Higher inflation makes relative prices

Correct AnswerverifiedShow Answer

Which of the following did NOT happen during the late 19th century in the U.S.?

Correct AnswerverifiedShow Answer

High and unexpected inflation has a greater cost

Correct AnswerverifiedShow Answer

On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, an increase in velocity means that

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

The increase in the overall level of prices is known as _____.

Correct AnswerverifiedShow Answer

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct AnswerverifiedShow Answer

Shoeleather cost refers to

Correct AnswerverifiedShow Answer

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

Correct AnswerverifiedShow Answer

When inflation rises people will

Correct AnswerverifiedShow Answer

Correct Answer
verified
That V is ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
P = MV/Y. With the numbers giv...
View Answer

The idea that firms incur actual costs when they change prices is known as _. Firms in countries with lower inflation rates will change price _ frequently compared to those countries where inflation is higher.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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