Question 1

If money demand shifts right,the price level falls.

Accepted Answer

A) True 
 B)False

Question 2

When deciding how much to save,people care most about

Accepted Answer

A)   after-tax nominal interest rates.
B)   after-tax real interest rates.
C)   before-tax real interest rates.
D)   before-tax nominal interest rates.E) B) and C)
F) A) and C)

Question 3

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1 to MD2? A)  an increase in the value of money B)  a decrease in the price level C)  an open-market purchase of bonds by the Federal Reserve D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-2.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Accepted Answer

A)   an increase in the value of money
B)   a decrease in the price level
C)   an open-market purchase of bonds by the Federal Reserve
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 4

Serena purchased 10 shares of GLC,Inc.stock for $200 per share;one year later she sold the 10 shares for $220 a share.Over the year,the price level increased from 135.0 to 143.1.The tax rate on capital gains is 50 percent.If the capital gains tax is on nominal gains,how much tax does Serena pay on her gain?

Accepted Answer

A)   $90
B)   $95
C)   $100
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 5

Figure 17-1 2 and the value of money is 2,then there is an excess A)  demand for money that is represented by the distance between points A and C. B)  demand for money that is represented by the distance between points A and B. C)  supply of money that is represented by the distance between points A and C. D)  supply of money that is represented by the distance between points A and B." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-1.If the money supply is MS2 and the value of money is 2,then there is an excess

Accepted Answer

A)   demand for money that is represented by the distance between points A and C.
B)   demand for money that is represented by the distance between points A and B.
C)   supply of money that is represented by the distance between points A and C.
D)   supply of money that is represented by the distance between points A and B.E) B) and D)
F) All of the above

Question 6

Suppose that in some tax year you earned a nominal interest rate of 4 percent.During the time you held these funds inflation was 1 percent.You compute that you made a real after-tax interest rate of 2 percent.What was your tax rate?

Accepted Answer

A)   50 percent
B)   33.3 percent
C)   25 percent
D)   None of the above are correct.E) B) and C)
F) B) and D)

Question 7

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

Accepted Answer

Inflation has raised the general price l...

Question 8

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1,then A)  when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services. B)  when the money market is in equilibrium,one unit of goods and services sells for 2 dollars. C)  there is an excess demand for money if the value of money in terms of goods and services is 0.375. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 17-2.If the relevant money-demand curve is the one labeled MD1,then

Accepted Answer

A)   when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services.
B)   when the money market is in equilibrium,one unit of goods and services sells for 2 dollars.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.375.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 9

If the economy unexpectedly went from inflation to deflation,

Accepted Answer

A)   both debtors and creditors would have reduced real wealth.
B)   both debtors and creditors would have increased real wealth.
C)   debtors would gain at the expense of creditors.
D)   creditors would gain at the expense of debtors.E) B) and D)
F) A) and D)

Question 10

If the inflation rate was 10%,and the tax rate was 25%,and you deposited money in a bank account that paid 14%,what is after tax real interest rate? Show you work.

Accepted Answer

The after- tax nominal interes...

Question 11

Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

Accepted Answer

A) True 
 B)False

Question 12

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Accepted Answer

A)   The nominal interest rate was 11 percent and the inflation rate was 5 percent.
B)   The nominal interest rate was 6 percent and the inflation rate was 5 percent.
C)   The nominal interest rate was 5 percent and the inflation rate was -1 percent.
D)   None of the above is correct.E) A) and B)
F) B) and C)

Question 13

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Accepted Answer

A) True 
 B)False

Question 14

If the value of a dollar falls,then the quantity of money demanded

Accepted Answer

A)   rises,meaning people want to hold more of their wealth in a liquid form.
B)   rises,meaning people desire to work more so their income rises.
C)   falls,meaning people want to hold less of their wealth in a liquid form.
D)   falls,meaning people want to work less so their income falls.E) B) and D)
F) None of the above

Question 15

If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent,what is the real interest rate?

Accepted Answer

A)   7 percent
B)   5 percent
C)   3 percent
D)   3/5 percentE) A) and C)
F) B) and C)

Question 16

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Accepted Answer

A)   6 times its old value.
B)   3 times its old value.
C)   1.5 times its old value.
D)   0.75 times its old valueE) A) and D)
F) C) and D)

Question 17

In the 1970s,the U.S.inflation rate reached about

Accepted Answer

A)   7 percent per year.
B)   10 percent per year.
C)   14 percent per year.
D)   20 percent per year.E) B) and D)
F) B) and C)

Question 18

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Accepted Answer

Relative prices are the value of one goo...

Question 19

The source of all four classic hyperinflations was high rates of money growth.

Accepted Answer

A) True 
 B)False

Question 20

Inflation can be measured by the

Accepted Answer

A)   change in the consumer price index.
B)   percentage change in the consumer price index.
C)   percentage change in the price of a specific commodity.
D)   change in the price of a specific commodity.E) B) and C)
F) A) and B)

Exam 30: Money Growth and Inflation

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.If the money supply is MS₂ and the value of money is 2,then there is an excess

Correct Answer
verified

When deciding how much to save,people care most about

Correct Answer
verified

If the inflation rate was 10%,and the tax rate was 25%,and you deposited money in a bank account that paid 14%,what is after tax real interest rate? Show you work.

Correct Answer
verified
The after- tax nominal interes...
View Answer

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Correct Answer
verified
Relative prices are the value of one goo...
View Answer

If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent,what is the real interest rate?

Correct Answer
verified

If the value of a dollar falls,then the quantity of money demanded

Correct Answer
verified

The source of all four classic hyperinflations was high rates of money growth.

Correct Answer
verified

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

Correct Answer
verified

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

Correct Answer
verified
Inflation has raised the general price l...
View Answer

If money demand shifts right,the price level falls.

Correct Answer
verified

Suppose that in some tax year you earned a nominal interest rate of 4 percent.During the time you held these funds inflation was 1 percent.You compute that you made a real after-tax interest rate of 2 percent.What was your tax rate?

Correct Answer
verified

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct Answer
verified

Correct Answer
verified

If the economy unexpectedly went from inflation to deflation,

Correct Answer
verified

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.If the relevant money-demand curve is the one labeled MD₁,then

Correct Answer
verified

Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

Correct Answer
verified

Inflation can be measured by the

Correct Answer
verified

In the 1970s,the U.S.inflation rate reached about

Correct Answer
verified

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Correct Answer
verified

Exam 30: Money Growth and Inflation

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Correct AnswerverifiedShow Answer

Figure 17-1 -Refer to Figure 17-1.If the money supply is MS2 and the value of money is 2,then there is an excess

Correct AnswerverifiedShow Answer

When deciding how much to save,people care most about

Correct AnswerverifiedShow Answer

If the inflation rate was 10%,and the tax rate was 25%,and you deposited money in a bank account that paid 14%,what is after tax real interest rate? Show you work.

Correct AnswerverifiedThe after- tax nominal interes...View AnswerShow Answer

Inflation distorts relative prices.What does this mean and why does it impose a cost on society?

Correct AnswerverifiedRelative prices are the value of one goo...View AnswerShow Answer

If the nominal interest rate is 5 percent and there is a deflation rate of 2 percent,what is the real interest rate?

Correct AnswerverifiedShow Answer

If the value of a dollar falls,then the quantity of money demanded

Correct AnswerverifiedShow Answer

The source of all four classic hyperinflations was high rates of money growth.

Correct AnswerverifiedShow Answer

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Correct AnswerverifiedShow Answer

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

Correct AnswerverifiedInflation has raised the general price l...View AnswerShow Answer

If money demand shifts right,the price level falls.

Correct AnswerverifiedShow Answer

Suppose that in some tax year you earned a nominal interest rate of 4 percent.During the time you held these funds inflation was 1 percent.You compute that you made a real after-tax interest rate of 2 percent.What was your tax rate?

Correct AnswerverifiedShow Answer

Inflation induces people to spend more resources maintaining lower money holdings.The costs of doing this are called shoeleather costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the economy unexpectedly went from inflation to deflation,

Correct AnswerverifiedShow Answer

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.If the relevant money-demand curve is the one labeled MD1,then

Correct AnswerverifiedShow Answer

Monetary neutrality means that while real variables may change in response to changes in the money supply,nominal variables do not.

Correct AnswerverifiedShow Answer

Inflation can be measured by the

Correct AnswerverifiedShow Answer

In the 1970s,the U.S.inflation rate reached about

Correct AnswerverifiedShow Answer

Shawn puts money into an account.One year later he sees that he has 5 percent more dollars and that his money will buy 6 percent more goods.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.If the money supply is MS₂ and the value of money is 2,then there is an excess

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The after- tax nominal interes...
View Answer

Correct Answer
verified
Relative prices are the value of one goo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

Correct Answer
verified

Correct Answer
verified
Inflation has raised the general price l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 17-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 17-2.If the relevant money-demand curve is the one labeled MD₁,then

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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