Question 1

Suppose the money supply is $100 billion and nominal GDP is $500 billion.What is the velocity of money?

Accepted Answer

Using the equation o...

Question 2

When people refer to inflation,are they generally referring to asset price inflation or goods price inflation? What is the difference between the two?

Accepted Answer

When people refer to inflation,they are ...

Question 3

Refer to the graphs shown. Which of the graphs correctly depict the long-run Phillips curve?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 4

If monetary policy makers want to target a negative interest rate, they:

Accepted Answer

A)  cannot do so since negative interest rates are impossible.
B)  need to stop inflation before they do it.
C)  need to encourage inflation before they do it.
D)  need to stop asset inflation before they do it.

Question 5

Who wins and who loses when there is unexpected inflation? Explain and offer an example.

Accepted Answer

When there is an unexpected inflation,th...

Question 6

According to institutionally-focused economists,

Accepted Answer

A)  the direction of causation goes from MV to PQ.
B)  asset inflation is a phenomenon that cannot occur.
C)  inflation is double the rise in money supply.
D)  price-setting conventions by institutions are the source of inflation.

Question 7

If the velocity of money is increasing, but the money supply is not, it is likely the economy is experiencing:

Accepted Answer

A)  a trade deficit.
B)  deflation.
C)  growth.
D)  inflation.

Question 8

What is the equation of exchange? State the equation and define its terms

Accepted Answer

The equation of exchange is an equation ...

Question 9

Asset inflation has a danger of:

Accepted Answer

A)  obscuring goods inflation.
B)  accommodating contractionary monetary policy.
C)  reducing the productive capacity of assets.
D)  leading to a misallocation of resources to risky investments.

Question 10

A cost of inflation is that it:

Accepted Answer

A)  makes everyone poorer.
B)  makes the poor poorer and the rich richer.
C)  reduces the informational content of prices.
D)  it raises real interest rates.

Question 11

Economists who accept the quantity theory of money believe that inflation is always and everywhere a monetary phenomenon.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the graph shown. If expected inflation increases from 0 percent to 6 percent, the: 2 to PC1. B) short-run Phillips curve will shift from PC1 to PC2.  C) economy will move from point C to point A. D) economy will move from point B to point C." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  short-run Phillips curve will shift from PC2 to PC1.
B)  short-run Phillips curve will shift from PC1 to PC2. 
C)  economy will move from point C to point A.
D)  economy will move from point B to point C.

Question 13

The short-run Phillips curve tells policy makers that if inflation is currently 6 percent and unemployment is 4 percent, measures to reduce the inflation rate to 4 percent will most likely lead to an unemployment rate of:

Accepted Answer

A)  0 percent.
B)  2 percent.
C)  4 percent.
D)  6 percent.

Question 14

Expectations of inflation are assumed to be constant at each point on a given short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 15

If the velocity of money is about 1.8 and the money stock is about $8 trillion, what is the real GDP?

Accepted Answer

A)  $0.8 trillion
B)  $4.4 trillion
C)  $14.2 trillion
D)  We cannot compute real GDP from the data; we can only compute nominal GDP.

Question 16

The Phillips curve represents a relationship between:

Accepted Answer

A)  inflation and unemployment.
B)  inflation and real income.
C)  money supply and interest rates.
D)  money supply and unemployment.

Question 17

Refer to the graph shown. Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the long run, this policy would most likely:

Accepted Answer

A)  raise inflation to 9 percent but leave unemployment at 5.5 percent.
B)  lower inflation to 3 percent but leave unemployment at 5.5 percent.
C)  raise inflation to 9 percent but lower unemployment to 4 percent.
D)  lower inflation to 3 percent but raise unemployment to 7.5 percent.

Question 18

One assumption that changes the equation of exchange into the quantity theory of money is:

Accepted Answer

A)  velocity remains constant.
B)  real output varies with the money supply.
C)  expectations change with inflation.
D)  price times quantity equals nominal output.

Question 19

The institutionalist theory of inflation differs from that of the quantity theory by focusing on:

Accepted Answer

A)  how firms determine wages and prices.
B)  the equation of exchange.
C)  the rate of growth in the money supply.
D)  the institutions that influence how the money supply is determined.

Question 20

Define the short-run Phillips curve.

Accepted Answer

The short-run Phillips curve is a downwa...

Exam 34: Inflation, Deflation, and Macro Policy

If the velocity of money is increasing, but the money supply is not, it is likely the economy is experiencing:

Correct AnswerverifiedShow Answer

Suppose the money supply is $100 billion and nominal GDP is $500 billion.What is the velocity of money?

Correct AnswerverifiedUsing the equation o...View AnswerShow Answer

If the velocity of money is about 1.8 and the money stock is about $8 trillion, what is the real GDP?

Correct AnswerverifiedShow Answer

According to institutionally-focused economists,

Correct AnswerverifiedShow Answer

Who wins and who loses when there is unexpected inflation? Explain and offer an example.

Correct AnswerverifiedWhen there is an unexpected inflation,th...View AnswerShow Answer

One assumption that changes the equation of exchange into the quantity theory of money is:

Correct AnswerverifiedShow Answer

Refer to the graph shown. Suppose an economy begins at point B but then adopts a contractionary monetary policy. In the long run, this policy would most likely:

Correct AnswerverifiedShow Answer

The institutionalist theory of inflation differs from that of the quantity theory by focusing on:

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Economists who accept the quantity theory of money believe that inflation is always and everywhere a monetary phenomenon.

Correct AnswerverifiedShow Answer

Expectations of inflation are assumed to be constant at each point on a given short-run Phillips curve.

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What is the equation of exchange? State the equation and define its terms

Correct AnswerverifiedThe equation of exchange is an equation ...View AnswerShow Answer

When people refer to inflation,are they generally referring to asset price inflation or goods price inflation? What is the difference between the two?

Correct AnswerverifiedWhen people refer to inflation,they are ...View AnswerShow Answer

The short-run Phillips curve tells policy makers that if inflation is currently 6 percent and unemployment is 4 percent, measures to reduce the inflation rate to 4 percent will most likely lead to an unemployment rate of:

Correct AnswerverifiedShow Answer

Refer to the graph shown. If expected inflation increases from 0 percent to 6 percent, the:

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A cost of inflation is that it:

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If monetary policy makers want to target a negative interest rate, they:

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Define the short-run Phillips curve.

Correct AnswerverifiedThe short-run Phillips curve is a downwa...View AnswerShow Answer

The Phillips curve represents a relationship between:

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Refer to the graphs shown. Which of the graphs correctly depict the long-run Phillips curve?

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Asset inflation has a danger of:

Correct AnswerverifiedShow Answer

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Using the equation o...
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When there is an unexpected inflation,th...
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Correct Answer
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Correct Answer
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The equation of exchange is an equation ...
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When people refer to inflation,they are ...
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Correct Answer
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Correct Answer
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Correct Answer
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The short-run Phillips curve is a downwa...
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Correct Answer
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