Question 1

Identify each of the following as nominal or real variables.
a.the physical output of goods and services
b.the overall price level
c.the dollar price of apples
d.the price of apples relative to the price of oranges
e.the unemployment rate
f.the amount that shows up on your paycheck after taxes
g.the amount of goods you can purchase with the wage you get each hour
h.the taxes that you pay the government

Accepted Answer

a. real variable
b. nominal va...

Question 2

When the money market is drawn with the value of money on the vertical axis,an increase in the price level causes a

Accepted Answer

A)  shift to the right of the money demand curve.
B)  shift to the left of the money demand curve.
C)  movement to the left along the money demand curve.
D)  movement to the right along the money demand curve.

Question 3

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

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 level

Question 4

Most economists believe the principle of monetary neutrality is

Accepted Answer

A)  relevant to both the short and long run.
B)  irrelevant to both the short and long run.
C)  mostly relevant to the short run.
D)  mostly relevant to the long run.

Question 5

Economic variables whose values are measured in monetary units are called

Accepted Answer

A)  dichotomous variables.
B)  nominal variables.
C)  classical variables.
D)  real variables.

Question 6

You buy a stock and its price rises less than the price level.Before taxes you made

Accepted Answer

A)  a nominal and real gain, and you pay taxes on the nominal gain.
B)  a nominal gain and a real loss, and you don't have to pay taxes since you gained less than the change in the price level.
C)  a nominal and a real gain, and you pay taxes on the real gain.
D)  a nominal gain and a real loss, and you pay taxes on the nominal gain.

Question 7

An associate professor of economics gets a $100 a month raise.She figures that with her current monthly salary she can't buy as many goods as she could last year.

Accepted Answer

A)  Her real and nominal salary have risen.
B)  Her real and nominal salary have fallen.
C)  Her real salary has risen and her nominal salary has fallen.
D)  Her real salary has fallen and her nominal salary has risen.

Question 8

Suppose that velocity rises while the money supply stays the same.It follows that

Accepted Answer

A)  P x Y must rise.
B)  P x Y must fall.
C)  P x Y must be unchanged.
D)  the effects on P x Y are uncertain.

Question 9

The shoeleather cost of inflation refers to

Accepted Answer

A)  the redistributional effects of unexpected inflation.
B)  the time spent searching for low prices when inflation rises.
C)  the waste of resources used to maintain lower money holdings.
D)  the increased cost to the government of printing more money.

Question 10

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Accepted Answer

A) True 
 B)False

Question 11

The price level rises from 120 to 150.What was the inflation rate?

Accepted Answer

A)  30%
B)  25%
C)  20%
D)  None of the above is correct.

Question 12

Monetary neutrality implies that an increase in the quantity of money will

Accepted Answer

A)  increase employment.
B)  increase the price level.
C)  increase the incentive to save.
D)  Not increase any of the above.

Question 13

Wealth is redistributed from debtors to creditors when inflation is

Accepted Answer

A)  high, but expected.
B)  low, but expected.
C)  unexpectedly high.
D)  unexpectedly low.

Question 14

The money supply curve shifts to the left when the Fed buys government bonds.

Accepted Answer

A) True 
 B)False

Question 15

Suppose one year ago that the price index was 120 and Mark purchased $20,000 worth of bonds.One year later the price index is 126.Mark redeems his bonds for $22,250 and is in a 40% tax bracket.What is Mark's real after-tax rate of interest to the nearest tenth of a percent?

Accepted Answer

A)  4.3%
B)  3.1%
C)  1.8%
D)  1.2%

Question 16

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 th...

Question 17

A rising price level eliminates an excess supply of money.

Accepted Answer

A) True 
 B)False

Question 18

If velocity and output were nearly constant,

Accepted Answer

A)  the inflation rate would be much higher than the money supply growth rate.
B)  the inflation rate would be about the same as the money supply growth rate.
C)  the inflation rate would be much lower than the money supply growth rate.
D)  any of the above would be possible.

Question 19

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.

Question 20

The United States has never had deflation.

Accepted Answer

A) True 
 B)False

Exam 30: Money Growth and Inflation

Suppose one year ago that the price index was 120 and Mark purchased $20,000 worth of bonds.One year later the price index is 126.Mark redeems his bonds for $22,250 and is in a 40% tax bracket.What is Mark's real after-tax rate of interest to the nearest tenth of a percent?

Correct Answer
verified

Economic variables whose values are measured in monetary units are called

Correct Answer
verified

Wealth is redistributed from debtors to creditors when inflation is

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,an increase in the price level causes a

Correct Answer
verified

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

Correct Answer
verified

The shoeleather cost of inflation refers to

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 th...
View Answer

The price level rises from 120 to 150.What was the inflation rate?

Correct Answer
verified

Between 1880 and 1886 prices that were

Correct Answer
verified

Most economists believe the principle of monetary neutrality is

Correct Answer
verified

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Correct Answer
verified

A rising price level eliminates an excess supply of money.

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

An associate professor of economics gets a $100 a month raise.She figures that with her current monthly salary she can't buy as many goods as she could last year.

Correct Answer
verified

You buy a stock and its price rises less than the price level.Before taxes you made

Correct Answer
verified

Suppose that velocity rises while the money supply stays the same.It follows that

Correct Answer
verified

Monetary neutrality implies that an increase in the quantity of money will

Correct Answer
verified

The United States has never had deflation.

Correct Answer
verified

The money supply curve shifts to the left when the Fed buys government bonds.

Correct Answer
verified

If velocity and output were nearly constant,

Correct Answer
verified

Exam 30: Money Growth and Inflation

Suppose one year ago that the price index was 120 and Mark purchased $20,000 worth of bonds.One year later the price index is 126.Mark redeems his bonds for $22,250 and is in a 40% tax bracket.What is Mark's real after-tax rate of interest to the nearest tenth of a percent?

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in monetary units are called

Correct AnswerverifiedShow Answer

Wealth is redistributed from debtors to creditors when inflation is

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,an increase in the price level causes a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The shoeleather cost of inflation refers to

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 th...View AnswerShow Answer

The price level rises from 120 to 150.What was the inflation rate?

Correct AnswerverifiedShow Answer

Between 1880 and 1886 prices that were

Correct AnswerverifiedShow Answer

Most economists believe the principle of monetary neutrality is

Correct AnswerverifiedShow Answer

In the 1990s,U.S.prices rose at about the same rate as in the 1970s.

Correct AnswerverifiedShow Answer

A rising price level eliminates an excess supply of money.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. real variableb. nominal va...View AnswerShow Answer

An associate professor of economics gets a $100 a month raise.She figures that with her current monthly salary she can't buy as many goods as she could last year.

Correct AnswerverifiedShow Answer

You buy a stock and its price rises less than the price level.Before taxes you made

Correct AnswerverifiedShow Answer

Suppose that velocity rises while the money supply stays the same.It follows that

Correct AnswerverifiedShow Answer

Monetary neutrality implies that an increase in the quantity of money will

Correct AnswerverifiedShow Answer

The United States has never had deflation.

Correct AnswerverifiedShow Answer

The money supply curve shifts to the left when the Fed buys government bonds.

Correct AnswerverifiedShow Answer

If velocity and output were nearly constant,

Correct AnswerverifiedShow Answer

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
verified
Typically,the government in countries th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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