Question 1

Which movie is an allegory about late 19th century monetary policy?

Accepted Answer

A)   The Wizard of Oz
B)   Mary Poppins
C)   It's a Wonderful Life
D)   Trading PlacesE) B) and C)
F) None of the above

Question 2

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.E) C) and D)
F) B) and D)

Question 3

Over the past 70 years,prices in the U.S.have risen on average about

Accepted Answer

A)   2 percent per year.
B)   4 percent per year.
C)   6 percent per year.
D)   8 percent per year.E) A) and C)
F) A) and D)

Question 4

Shoeleather cost refers to

Accepted Answer

A)   the cost of more frequent price changes induced by higher inflation.
B)   the distortion in resource allocation created by distortions in relative prices due to inflation.
C)   resources used to maintain lower money holdings when inflation is high.
D)   the tendency to expend more effort searching for the lowest price when inflation is high.E) C) and D)
F) A) and B)

Question 5

In which case below does a person's purchasing power from saving increase the least?

Accepted Answer

A)   the nominal interest rate = 10% and inflation = 8%
B)   the nominal interest rate = 9% and inflation = 6%
C)   the nominal interest rate = 8% and inflation = 4%
D)   the nominal interest rate = 7% and inflation = 2%E) A) and B)
F) B) and C)

Question 6

In United States history there were long periods when most prices fell.

Accepted Answer

A) True 
 B)False

Question 7

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.E) B) and C)
F) A) and B)

Question 8

Economic variables whose values are measured in goods are called

Accepted Answer

A)   dichotomous variables.
B)   nominal variables.
C)   classical variables.
D)   real variables.E) All of the above
F) A) and D)

Question 9

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Accepted Answer

A)   both the classical dichotomy and the quantity theory of money.
B)   the classical dichotomy,but not the quantity theory of money.
C)   the quantity theory of money,but not the classical dichotomy.
D)   neither the classical dichotomy nor the quantity theory of money.E) None of the above
F) C) and D)

Question 10

The story The Wizard of Oz can be interpreted as an allegory about U.S.monetary policy in the late 19th century.

Accepted Answer

A) True 
 B)False

Question 11

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Accepted Answer

An increase in inflation reduc...

Question 12

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.E) None of the above
F) A) and B)

Question 13

The inflation tax falls mostly heavily on

Accepted Answer

A)   those who hold a lot of currency and accounts for a large share of U.S.government revenue.
B)   those who hold a lot of currency but accounts for a small share of U.S.government revenue.
C)   those who hold little currency and accounts for a large share of U.S.government revenue.
D)   those who hold little currency but accounts for a small share of U.S.government revenue.E) A) and D)
F) All of the above

Question 14

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Accepted Answer

When the money supply increases,there is...

Question 15

You put money into an account and earn a real interest rate of 5 percent.Inflation is 2 percent,and your marginal tax rate is 40 percent.What is your after-tax real rate of interest?

Accepted Answer

A)   1 percent
B)   1.8 percent
C)   2.2 percent
D)   4.2 percentE) All of the above
F) B) and C)

Question 16

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Accepted Answer

A) True 
 B)False

Question 17

In the U.S. ,taxes on capital gains are computed using

Accepted Answer

A)   nominal gains.This is one way by which higher inflation discourages saving.
B)   nominal gains.This is one way by which higher inflation encourages saving.
C)   real gains.This is one way by which higher inflation discourages saving.
D)   real gains.This is one way by which higher inflation encourages saving.E) A) and D)
F) B) and C)

Question 18

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.You compute the price of jeans relative to tee-shirts.

Accepted Answer

A)   The dollar price of jeans and the relative price of jeans are both nominal variables.
B)   The dollar price of jeans and the relative price of jeans are both real variables.
C)   The dollar price of jeans is a nominal variable;the relative price of jeans is a real variable.
D)   The dollar price of jeans is a real variable;the relative price of jeans is a nominal variable.E) C) and D)
F) A) and B)

Question 19

Shoeleather costs and menu costs are both costs of anticipated inflation.

Accepted Answer

A) True 
 B)False

Question 20

If velocity is 6,real output is 10,000,and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change,what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Accepted Answer

P = MV/Y.With the numbers give...

Exam 30: Money Growth and Inflation

The inflation tax falls mostly heavily on

Correct AnswerverifiedShow Answer

Between 1880 and 1886,prices that were

Correct AnswerverifiedShow Answer

Explain the adjustment process in the money market that creates a change in the price level when the money supply increases.

Correct AnswerverifiedWhen the money supply increases,there is...View AnswerShow Answer

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

Correct AnswerverifiedShow Answer

Shoeleather costs and menu costs are both costs of anticipated inflation.

Correct AnswerverifiedShow Answer

Inflation necessarily distorts saving when either real interest income or nominal interest income is taxed.

Correct AnswerverifiedShow Answer

If velocity is 6,real output is 10,000,and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change,what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Correct AnswerverifiedP = MV/Y.With the numbers give...View AnswerShow Answer

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Correct AnswerverifiedAn increase in inflation reduc...View AnswerShow Answer

Which movie is an allegory about late 19th century monetary policy?

Correct AnswerverifiedShow Answer

Shoeleather cost refers to

Correct AnswerverifiedShow Answer

Economic variables whose values are measured in goods are called

Correct AnswerverifiedShow Answer

You put money into an account and earn a real interest rate of 5 percent.Inflation is 2 percent,and your marginal tax rate is 40 percent.What is your after-tax real rate of interest?

Correct AnswerverifiedShow Answer

The story The Wizard of Oz can be interpreted as an allegory about U.S.monetary policy in the late 19th century.

Correct AnswerverifiedShow Answer

Over the past 70 years,prices in the U.S.have risen on average about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the U.S. ,taxes on capital gains are computed using

Correct AnswerverifiedShow Answer

In which case below does a person's purchasing power from saving increase the least?

Correct AnswerverifiedShow Answer

In United States history there were long periods when most prices fell.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.You compute the price of jeans relative to tee-shirts.

Correct AnswerverifiedShow Answer

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When the money supply increases,there is...
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P = MV/Y.With the numbers give...
View Answer

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An increase in inflation reduc...
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Correct Answer
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