Question 1

What type of variable is the price level?

Accepted Answer

A)  a relative variable
B)  an actual variable
C)  a real variable
D)  a nominal variableE) B) and C)
F) A) and D)

Question 2

Given a nominal interest rate of 12 percent,in which of the following cases would you earn the highest after-tax real interest rate?

Accepted Answer

A)  Inflation is 5 percent, and the tax rate is 20 percent.
B)  Inflation is 4 percent, and the tax rate is 30 percent.
C)  Inflation is 3 percent, and the tax rate is 40 percent.
D)  Inflation is 2 percent, and the tax rate is 50 percent.E) B) and C)
F) A) and C)

Question 3

What does the quantity theory of money try to explain?

Accepted Answer

A)  how inflation determines economic growth
B)  the relationship between the quantity of money and the price level
C)  the determinants of relative prices in the economy
D)  the relationship between inflation and unemploymentE) A) and B)
F) All of the above

Question 4

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Accepted Answer

A)  a net gain
B)  a Fisher gain
C)  a capital gain
D)  an inflation tax gainE) All of the above
F) C) and D)

Question 5

When and where did hyperinflation occur?

Accepted Answer

A)  during 1880-1896 in the United States
B)  in post-World War I Germany
C)  during the 1970s in Canada
D)  during 1930-1933 in the United StatesE) A) and B)
F) B) and C)

Question 6

Consider the quantity equation MV = PY.Assume that the money market is in equilibrium,where the money supply equals the demand for money,MS = MD = M.Assume also that the velocity of money is constant.In a graph with P on the vertical axis and Y on the horizontal axis,draw the relationship Y(P)implied by the quantity theory.How could this curve be interpreted? How does it change when MS increases?

Accepted Answer

We can re-write the quantity equation Y ...

Question 7

When the number of dollars needed to buy a representative basket of goods falls,what happens to the value of money?

Accepted Answer

A)  It rises, and so the price level rises.
B)  It rises, and so the price level falls.
C)  It falls, and so the price level rises.
D)  It falls, and so the price level falls.E) B) and D)
F) B) and C)

Question 8

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

Accepted Answer

A)  real output
B)  both real and nominal interest rate
C)  inflation rate
D)  the price levelE) B) and C)
F) None of the above

Question 9

According to Hume,the classical dichotomy is useful for analyzing the economy because nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Accepted Answer

A) True 
 B)False

Question 10

What does nominal GDP measure?

Accepted Answer

A)  the total quantity of final goods and services produced
B)  the dollar value of the economy's output of final goods and services
C)  the total income received from producing final goods and services in constant dollars
D)  the price levelE) None of the above
F) C) and D)

Question 11

Which of the following best describes the effects of an open-market operation undertaken by the Bank of Canada?

Accepted Answer

A)  If the Bank of Canada purchases bonds in the open market, then the money supply shifts right and the price level increases.
B)  If the Bank of Canada sells bonds in the open market, then the money supply shifts right and the price level decreases.
C)  If the Bank of Canada purchases bonds in the open market, then the money supply shifts left and the price level decreases.
D)  If the Bank of Canada sells bonds in the open market, then the money supply shifts left and the price level increases.E) B) and C)
F) A) and D)

Question 12

What terms refers to the cost of changing price tags and price listings?

Accepted Answer

A)  inflation-induced tax distortions
B)  relative-price variability costs
C)  shoeleather costs
D)  menu costsE) B) and C)
F) A) and B)

Question 13

Nominal GDP measures output of final goods and services in physical terms.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the Bank of Canada sells government bonds.Use a graph of the money market to show what this does to the value of money.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the Bank of Canada sells governmen...

Question 15

Figure 11-1
 
-Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Accepted Answer

A)  The demand for goods and services decreases.
B)  The economy's ability to produce goods and services increases.
C)  The equilibrium price level increases.
D)  The equilibrium value of money increases.E) C) and D)
F) None of the above

Question 16

Randy pays $120 for a bag of goods he purchases at the HyValu discount store.Which of the following accurately identifies the types of variables involved?

Accepted Answer

A)  The $120 is a real variable; the bag of groceries is a nominal variable.
B)  The $120 is a nominal variable; the bag of groceries is a real variable.
C)  Both the $120 and the bag of groceries are nominal variables.
D)  Both the $120 and the bag of groceries are real variables.E) A) and B)
F) All of the above

Question 17

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

Accepted Answer

A)  the real prices
B)  the nominal interest rate
C)  the real GDP
D)  the nominal GDPE) A) and C)
F) C) and D)

Question 18

What idea does the classical dichotomy refer to?

Accepted Answer

A)  The supply of money is irrelevant for understanding the determinants of nominal and real variables.
B)  The supply of money determines nominal variables, but not real variables.
C)  The supply of money determines real variables, but not nominal variables.
D)  The supply of money is a determinant of both real and nominal variables.E) B) and C)
F) None of the above

Question 19

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Accepted Answer

A)  production costs
B)  losses in real income
C)  losses in tax revenue
D)  menu costsE) C) and D)
F) A) and B)

Question 20

Figure 11-1
 
-Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Accepted Answer

A)  The equilibrium value of money decreases.
B)  The equilibrium price level decreases.
C)  The supply of money decreases.
D)  The demand for goods and services decreases.E) All of the above
F) C) and D)

Exam 11: Money Growth and Inflation

What does nominal GDP measure?

Correct Answer
verified

What idea does the classical dichotomy refer to?

Correct Answer
verified

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Correct Answer
verified

Randy pays $120 for a bag of goods he purchases at the HyValu discount store.Which of the following accurately identifies the types of variables involved?

Correct Answer
verified

What does the quantity theory of money try to explain?

Correct Answer
verified

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Correct Answer
verified

When and where did hyperinflation occur?

Correct Answer
verified

Nominal GDP measures output of final goods and services in physical terms.

Correct Answer
verified

Suppose the Bank of Canada sells government bonds.Use a graph of the money market to show what this does to the value of money.

Correct Answer
verified
When the Bank of Canada sells governmen...
View Answer

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Correct Answer
verified

Correct Answer
verified
We can re-write the quantity equation Y ...
View Answer

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Correct Answer
verified

When the number of dollars needed to buy a representative basket of goods falls,what happens to the value of money?

Correct Answer
verified

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

Correct Answer
verified

What terms refers to the cost of changing price tags and price listings?

Correct Answer
verified

Which of the following best describes the effects of an open-market operation undertaken by the Bank of Canada?

Correct Answer
verified

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

Correct Answer
verified

According to Hume,the classical dichotomy is useful for analyzing the economy because nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Correct Answer
verified

What type of variable is the price level?

Correct Answer
verified

Given a nominal interest rate of 12 percent,in which of the following cases would you earn the highest after-tax real interest rate?

Correct Answer
verified

Exam 11: Money Growth and Inflation

What does nominal GDP measure?

Correct AnswerverifiedShow Answer

What idea does the classical dichotomy refer to?

Correct AnswerverifiedShow Answer

Monica buys a bond for $750 and then sells it later for $950.What type of gain is Monica's experience?

Correct AnswerverifiedShow Answer

Randy pays $120 for a bag of goods he purchases at the HyValu discount store.Which of the following accurately identifies the types of variables involved?

Correct AnswerverifiedShow Answer

What does the quantity theory of money try to explain?

Correct AnswerverifiedShow Answer

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Correct AnswerverifiedShow Answer

When and where did hyperinflation occur?

Correct AnswerverifiedShow Answer

Nominal GDP measures output of final goods and services in physical terms.

Correct AnswerverifiedShow Answer

Suppose the Bank of Canada sells government bonds.Use a graph of the money market to show what this does to the value of money.

Correct Answerverified When the Bank of Canada sells governmen...View AnswerShow Answer

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWe can re-write the quantity equation Y ...View AnswerShow Answer

Figure 11-1 -Refer to the Figure 11-1.What happens when the money supply curve shifts from MS₁ to MS₂?

Correct AnswerverifiedShow Answer

When the number of dollars needed to buy a representative basket of goods falls,what happens to the value of money?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What terms refers to the cost of changing price tags and price listings?

Correct AnswerverifiedShow Answer

Which of the following best describes the effects of an open-market operation undertaken by the Bank of Canada?

Correct AnswerverifiedShow Answer

If money is neutral and velocity is stable,what does an increase in the money supply create a proportional increase in?

Correct AnswerverifiedShow Answer

According to Hume,the classical dichotomy is useful for analyzing the economy because nominal variables are heavily influenced by developments in the monetary system,and real variables are not.

Correct AnswerverifiedShow Answer

What type of variable is the price level?

Correct AnswerverifiedShow Answer

Given a nominal interest rate of 12 percent,in which of the following cases would you earn the highest after-tax real interest rate?

Correct AnswerverifiedShow 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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When the Bank of Canada sells governmen...
View Answer

Correct Answer
verified

Correct Answer
verified
We can re-write the quantity equation Y ...
View Answer

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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