Question 1

When the money market is drawn with the value of money on the vertical axis,the price level increases if

Accepted Answer

A)  money demand shifts right and decreases if money supply shifts right.
B)  money demand shifts right and decreases if money supply shifts left.
C)  money demand shifts left and decreases if money supply shifts right.
D)  money demand shifts left and decreases if money supply shifts left.

Question 2

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1.At the end of 2010 the relevant money-supply curve was the one labeled MS2.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2010? A) -33 percent B) 17 percent C) 50 percent D) 67 percent" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-3.At the end of 2009 the relevant money-supply curve was the one labeled MS1.At the end of 2010 the relevant money-supply curve was the one labeled MS2.Assuming the economy is always in equilibrium,what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)  -33 percent
B)  17 percent
C)  50 percent
D)  67 percent

Question 3

The supply of money increases when

Accepted Answer

A)  the price level falls.
B)  the interest rate increases.
C)  the Fed makes open-market purchases.
D)  money demand increases.

Question 4

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

Accepted Answer

A)  nominal wages
B)  the price level
C)  nominal GDP
D)  All of the above are correct.

Question 5

With the value of money on the vertical axis,the money supply curve is

Accepted Answer

A)  upward sloping because people supply a larger quantity of money when the value of money increases.
B)  downward sloping because people supply a larger quantity of money when the value of money decreases.
C)  horizontal because we assume the central bank controls the money supply
D)  vertical because we assume the central bank controls the money supply.

Question 6

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Accepted Answer

A)  your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage also increased.
B)  your nominal wage increase.If your nominal wage rose by a greater percentage than the price level,then your real wage decreased.
C)  your real wage increase.If your real wage rose by a greater percentage than the price level,then your nominal wage also increased.
D)  your real wage decrease.If your real wage rose by a greater percentage than the price level,then your nominal wage decreased.

Question 7

The payments you make on your automobile loan are given in terms of dollars.As prices rise you notice you give up fewer goods to make your payments.

Accepted Answer

A)  The dollar amount you pay is a nominal value.The number of goods you give up is a real value.
B)  The dollar amount you pay is a real value.The number of goods you give up is a nominal value.
C)  Both the dollar amount you pay and the goods you give up are nominal values.
D)  Both the dollar amount you pay and the goods you give up are real values.

Question 8

Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level

Accepted Answer

A)  is 1.5 times its old value.
B)  is 3 times its old value.
C)  is 6 times its old value.
D)  is the same as its old value.

Question 9

Your spouse complains that her 6% raise this year will not keep up with the increase in prices.In other words,she is unable to buy the same basket of goods with her 6% raise.Therefore,she believes that her

Accepted Answer

A)  nominal income and real income increased.
B)  nominal income increased,but their real income decreased.
C)  nominal income and real income decreased.
D)  nominal income decreased,but their real income increased.

Question 10

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

Accepted Answer

A)  the price level and nominal GDP
B)  the price level and real GDP
C)  only real GDP
D)  only the price level

Question 11

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

Accepted Answer

A)  shifts rightward,causing the value of money measured in terms of goods and services to rise.
B)  shifts rightward,causing the value of money measured in terms of goods and services to fall.
C)  shifts leftward,causing the value of money measured in terms of goods and services to rise.
D)  shifts leftward,causing the value of money measured in terms of goods and services to fall.

Question 12

The nominal interest rate is 5 percent and the inflation rate is 2 percent.What is the real interest rate?

Accepted Answer

A)  7 percent
B)  2.5 percent
C)  10 percent
D)  3 percent

Question 13

Last year,you earned a nominal wage of $10 per hour and the price level was 120.This year your nominal wage is $11 per hour,but you are unable to purchase the same amount of goods as last year.The price level this year must be

Accepted Answer

A)  135
B)  132
C)  125
D)  121

Question 14

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.

Question 15

When the money market is drawn with the value of money on the vertical axis,if the value of money is above the equilibrium level,

Accepted Answer

A)  the price level will rise.
B)  the value of money will rise.
C)  money demand will shift leftward.
D)  money demand will shift rightward.

Question 16

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

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 17

Open-market purchases by the Fed

Accepted Answer

A)  make the price level and value of money fall.
B)  make the price level rise,and make the value of money fall.
C)  make the price level and make the value of money rise.
D)  make the price level fall,and make the value of money rise.

Question 18

From the early 1980's through the 1990's,the nominal interest rate

Accepted Answer

A)  fell because the Fed got inflation under control.
B)  fell because the Fed let inflation get out of control.
C)  rose because the Fed got inflation under control.
D)  rose because the Fed let inflation get out of control.

Question 19

According to the assumptions of the quantity theory of money,if the money supply decreases by 7 percent,then

Accepted Answer

A)  nominal and real GDP would fall by 7 percent.
B)  nominal GDP would fall by 7 percent;real GDP would be unchanged.
C)  nominal GDP would be unchanged;real GDP would fall by 7 percent.
D)  neither nominal GDP nor real GDP would change.

Question 20

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Accepted Answer

A)  inflation and nominal interest rates,but does not change real interest rates.
B)  inflation,nominal interest rates,and real interest rates.
C)  inflation and real interest rates,but does not change nominal interest rates.
D)  nominal interest rates and real interest rates,but does not change inflation.

Exam 17: Money Growth and Inflation: The Classical Theory of Inflation

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

Correct Answer
verified

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

Correct Answer
verified

From the early 1980's through the 1990's,the nominal interest rate

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Open-market purchases by the Fed

Correct Answer
verified

Last year,you earned a nominal wage of $10 per hour and the price level was 120.This year your nominal wage is $11 per hour,but you are unable to purchase the same amount of goods as last year.The price level this year must be

Correct Answer
verified

The supply of money increases when

Correct Answer
verified

Your spouse complains that her 6% raise this year will not keep up with the increase in prices.In other words,she is unable to buy the same basket of goods with her 6% raise.Therefore,she believes that her

Correct Answer
verified

The nominal interest rate is 5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct Answer
verified

With the value of money on the vertical axis,the money supply curve is

Correct Answer
verified

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Correct Answer
verified

The payments you make on your automobile loan are given in terms of dollars.As prices rise you notice you give up fewer goods to make your payments.

Correct Answer
verified

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Correct Answer
verified

According to the assumptions of the quantity theory of money,if the money supply decreases by 7 percent,then

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,if the value of money is above the equilibrium level,

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis,the price level increases if

Correct Answer
verified

Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level

Correct Answer
verified

Exam 17: Money Growth and Inflation: The Classical Theory of Inflation

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if the Federal Reserve buys bonds,then the money supply curve

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From the early 1980's through the 1990's,the nominal interest rate

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed

Correct AnswerverifiedShow Answer

Last year,you earned a nominal wage of $10 per hour and the price level was 120.This year your nominal wage is $11 per hour,but you are unable to purchase the same amount of goods as last year.The price level this year must be

Correct AnswerverifiedShow Answer

The supply of money increases when

Correct AnswerverifiedShow Answer

Your spouse complains that her 6% raise this year will not keep up with the increase in prices.In other words,she is unable to buy the same basket of goods with her 6% raise.Therefore,she believes that her

Correct AnswerverifiedShow Answer

The nominal interest rate is 5 percent and the inflation rate is 2 percent.What is the real interest rate?

Correct AnswerverifiedShow Answer

With the value of money on the vertical axis,the money supply curve is

Correct AnswerverifiedShow Answer

According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases

Correct AnswerverifiedShow Answer

The payments you make on your automobile loan are given in terms of dollars.As prices rise you notice you give up fewer goods to make your payments.

Correct AnswerverifiedShow Answer

Your boss gives you an increase in the number of dollars you earn per hour.This increase in pay makes

Correct AnswerverifiedShow Answer

According to the assumptions of the quantity theory of money,if the money supply decreases by 7 percent,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if the value of money is above the equilibrium level,

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,the price level increases if

Correct AnswerverifiedShow Answer

Suppose the money supply tripled,but at the same time velocity doubled and real GDP was unchanged.According to the quantity equation the price level

Correct AnswerverifiedShow Answer

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