Question 1

Expected inflation redistributes wealth from _____.

Accepted Answer

A)  creditors to debtors
B)  owners of real property to owners of financial assets
C)  debtors to creditors
D)  the government to fixed income recipients

Question 2

An extraordinarily high rate of inflation is called:

Accepted Answer

A)  disinflation
B)  hyperinflation
C)  hyperdisinflation
D)  adverse inflation

Question 3

The quantity equation states that:

Accepted Answer

A)  money times velocity equals nominal GDP
B)  money times velocity equals real GDP
C)  money times prices equals nominal GDP
D)  money times prices equals real GDP

Question 4

According to the Fisher effect, an increase in the rate of inflation from three per cent to four per cent will _____.

Accepted Answer

A)  increase the nominal interest rate by seven percentage points
B)  increase the real interest rate by three percentage points
C)  decrease the nominal interest rate by three percentage points
D)  increase the nominal interest rate by one percentage point

Question 5

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Accepted Answer

A)  increase the nominal interest rate by 3percentage points
B)  increase the real interest rate by 3 percentage points
C)  decrease the nominal interest rate by 3 percentage points
D)  increase the nominal interest rate by less than 3 percentage points

Question 6

Nominal GDP measures:

Accepted Answer

A)  the dollar value of the economy's output of goods and services
B)  the total quantity of goods and services produced
C)  the total income received from producing goods and services in constant dollars
D)  all of the above

Question 7

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.Hence when the overall price level rises, the value of money falls.

Accepted Answer

A) True 
 B)False

Question 8

What are the costs of inflation?

Accepted Answer

The costs of inflation include 'shoeleat...

Question 9

Inflation can be measured by the:

Accepted Answer

A)  absolute change in the CPI
B)  percentage change in the CPI
C)  absolute change in the GDP deflator
D)  percentage change in the price of oil

Question 10

According to the equation of exchange, what is the relationship between money growth and inflation along a long-term growth path?

Accepted Answer

According to the equation of e...

Question 11

Consider a simple economy that produces only chocolates.The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5.If the quantity of money supplied in the economy is $25, then the velocity of money is:

Accepted Answer

A)  2.5
B)  10
C)  20
D)  1000

Question 12

Calculate the velocity of money for each of the following situations:
a.The money supply is 1000, the price level is 20 and output is 200
b.The money supply is 50, the price level is 100 and output is 20
c.The money supply is 25, the price level is 25 and output is 200
d.The money supply is 800, the price level is 2 and output is 300

Accepted Answer

a.Velocity is 4.
b.V...

Question 13

Explain inflation tax.How does government collect the inflation tax and who pays this tax?

Accepted Answer

The inflation tax is the revenue the gov...

Question 14

Unexpected inflation redistributes wealth among debtors and creditors.Who benefits - creditors or debtors? Explain.

Accepted Answer

If inflation is unexpected, cr...

Question 15

The notion that nominal variables are heavily influenced by the quantity of money, and that money is largely irrelevant to understanding the determinants of real variables, is called:

Accepted Answer

A)  monetarism
B)  the quantity theory
C)  the Fisher effect
D)  the classical dichotomy

Question 16

According to the classical dichotomy, which of the following is determined by monetary factors?

Accepted Answer

A)  The real wage
B)  The nominal wage
C)  The real interest rate
D)  Real GDP

Question 17

What is the classical dichotomy, and to whom do we attribute it?

Accepted Answer

The classical dichotomy refers...

Question 18

Paying for a government program by printing money:

Accepted Answer

A)  reduces the opportunity cost of the program
B)  is exactly like imposing an income tax to pay for the program
C)  imposes an inflation tax to pay for the program
D)  all of the above

Question 19

If the bank posts a nominal interest rate of seven per cent per year and the inflation rate is four per cent per year, then the real interest rate is:

Accepted Answer

A)  minus three per cent
B)  three per cent
C)  four per cent
D)  11 per cent

Question 20

Suppose inflation is currently running at 15% and, as a result, sales catalogues have to be reprinted every month.This is an example of:

Accepted Answer

A)  noise in the price system
B)  menu costs due to inflation
C)  an unexpected redistribution in wealth
D)  shoe-leather costs of inflation

Exam 30: Inflation: Its Causes and Costs

According to the Fisher effect, an increase in the rate of inflation from three per cent to four per cent will _____.

Correct Answer
verified

What is the classical dichotomy, and to whom do we attribute it?

Correct Answer
verified
The classical dichotomy refers...
View Answer

According to the classical dichotomy, which of the following is determined by monetary factors?

Correct Answer
verified

Consider a simple economy that produces only chocolates.The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5.If the quantity of money supplied in the economy is $25, then the velocity of money is:

Correct Answer
verified

If the bank posts a nominal interest rate of seven per cent per year and the inflation rate is four per cent per year, then the real interest rate is:

Correct Answer
verified

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Correct Answer
verified

The quantity equation states that:

Correct Answer
verified

The notion that nominal variables are heavily influenced by the quantity of money, and that money is largely irrelevant to understanding the determinants of real variables, is called:

Correct Answer
verified

Correct Answer
verified
a.Velocity is 4.
b.V...
View Answer

Suppose inflation is currently running at 15% and, as a result, sales catalogues have to be reprinted every month.This is an example of:

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.Hence when the overall price level rises, the value of money falls.

Correct Answer
verified

Paying for a government program by printing money:

Correct Answer
verified

Unexpected inflation redistributes wealth among debtors and creditors.Who benefits - creditors or debtors? Explain.

Correct Answer
verified
If inflation is unexpected, cr...
View Answer

According to the equation of exchange, what is the relationship between money growth and inflation along a long-term growth path?

Correct Answer
verified
According to the equation of e...
View Answer

An extraordinarily high rate of inflation is called:

Correct Answer
verified

Inflation can be measured by the:

Correct Answer
verified

What are the costs of inflation?

Correct Answer
verified
The costs of inflation include 'shoeleat...
View Answer

Nominal GDP measures:

Correct Answer
verified

Explain inflation tax.How does government collect the inflation tax and who pays this tax?

Correct Answer
verified
The inflation tax is the revenue the gov...
View Answer

Expected inflation redistributes wealth from _____.

Correct Answer
verified

Exam 30: Inflation: Its Causes and Costs

According to the Fisher effect, an increase in the rate of inflation from three per cent to four per cent will _____.

Correct AnswerverifiedShow Answer

What is the classical dichotomy, and to whom do we attribute it?

Correct AnswerverifiedThe classical dichotomy refers...View AnswerShow Answer

According to the classical dichotomy, which of the following is determined by monetary factors?

Correct AnswerverifiedShow Answer

Consider a simple economy that produces only chocolates.The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5.If the quantity of money supplied in the economy is $25, then the velocity of money is:

Correct AnswerverifiedShow Answer

If the bank posts a nominal interest rate of seven per cent per year and the inflation rate is four per cent per year, then the real interest rate is:

Correct AnswerverifiedShow Answer

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Correct AnswerverifiedShow Answer

The quantity equation states that:

Correct AnswerverifiedShow Answer

The notion that nominal variables are heavily influenced by the quantity of money, and that money is largely irrelevant to understanding the determinants of real variables, is called:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Velocity is 4.b.V...View AnswerShow Answer

Suppose inflation is currently running at 15% and, as a result, sales catalogues have to be reprinted every month.This is an example of:

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.Hence when the overall price level rises, the value of money falls.

Correct AnswerverifiedShow Answer

Paying for a government program by printing money:

Correct AnswerverifiedShow Answer

Unexpected inflation redistributes wealth among debtors and creditors.Who benefits - creditors or debtors? Explain.

Correct AnswerverifiedIf inflation is unexpected, cr...View AnswerShow Answer

According to the equation of exchange, what is the relationship between money growth and inflation along a long-term growth path?

Correct AnswerverifiedAccording to the equation of e...View AnswerShow Answer

An extraordinarily high rate of inflation is called:

Correct AnswerverifiedShow Answer

Inflation can be measured by the:

Correct AnswerverifiedShow Answer

What are the costs of inflation?

Correct AnswerverifiedThe costs of inflation include 'shoeleat...View AnswerShow Answer

Nominal GDP measures:

Correct AnswerverifiedShow Answer

Explain inflation tax.How does government collect the inflation tax and who pays this tax?

Correct AnswerverifiedThe inflation tax is the revenue the gov...View AnswerShow Answer

Expected inflation redistributes wealth from _____.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The classical dichotomy refers...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
a.Velocity is 4.
b.V...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If inflation is unexpected, cr...
View Answer

Correct Answer
verified
According to the equation of e...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The costs of inflation include 'shoeleat...
View Answer

Correct Answer
verified

Correct Answer
verified
The inflation tax is the revenue the gov...
View Answer

Correct Answer
verified