Question 1

When the money market is drawn with the value of money on the vertical axis,if money supply and money demand both shift to the right

Accepted Answer

A)  the price level must have risen
B)  the price level must have fallen.
C)  the price level rises if money supply shifts farther than money demand.
D)  the price level falls if money supply shifts farther than money demand.E) A) and B)
F) A) and C)

Question 2

Suppose the price level rises,but the number of dollars you are paid per hour stays the same.This means that your

Accepted Answer

A)  nominal wage is higher.
B)  nominal wage is lower.
C)  real wage is higher.
D)  real wage is lower.E) All of the above
F) B) and C)

Question 3

Open-market purchases by the Fed make the money supply

Accepted Answer

A)  increase,which makes the value of money increase.
B)  increase,which makes the value of money decrease.
C)  decrease,which makes the value of money decrease.
D)  decrease,which makes the value of money increase.E) A) and C)
F) A) and B)

Question 4

Other things the same,a decrease in velocity means that

Accepted Answer

A)  the rate at which money changes hands falls,so the price level rises.
B)  the rate at which money changes hands falls,so the price level falls.
C)  the rate at which money changes hands rises,so the price level rises.
D)  the rate at which money changes hands rises,so the price level falls.E) None of the above
F) A) and B)

Question 5

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Accepted Answer

A)  the inflation rate and nominal interest rates.
B)  the inflation rate,but not nominal interest rates.
C)  nominal interest rates,but not the inflation rate.
D)  neither the inflation rate nor nominal interest rates.E) C) and D)
F) None of the above

Question 6

If when the money supply changes,real output and velocity do not change,then a 2 percent increase in the money supply

Accepted Answer

A)  decreases the price level by 2 percent.
B)  decreases the price level by less than 2 percent.
C)  increases the price level by less than 2 percent.
D)  increases the price level by 2 percent.E) All of the above
F) A) and C)

Question 7

On a Sunday morning,Tom sold 300 cups of coffee for a total of $750.

Accepted Answer

A)  The $750 is a nominal variable.The 300 cups of coffee is a real variable.
B)  The $750 is a real variable.The 300 cups of coffee is a nominal variable.
C)  Both the $750 and the 300 cups of coffee are nominal variables.
D)  Both the $750 and the 300 cups of coffee are real variables.E) A) and B)
F) A) and D)

Question 8

During the 2008 financial crisis velocity decreased.This means that the rate at which money changed hands

Accepted Answer

A)  decreased.Other things the same,a decrease in velocity decreases the price level.
B)  decreased.Other things the same,a decrease in velocity increases the price level.
C)  increased.Other things the same,an increase in velocity decreases the price level.
D)  increased.Other things the same,an increase in velocity increases the price level.E) C) and D)
F) A) and B)

Question 9

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 
-Refer to Figure 30-3.What quantity is measured along the vertical axis?

Accepted Answer

A)  the price level
B)  the velocity of money
C)  the value of money
D)  the quantity of moneyE) A) and B)
F) A) and C)

Question 10

If monetary neutrality holds,then an increase in the money supply

Accepted Answer

A)  increases real but not nominal variables.Most economists think that monetary neutrality is a good description of the short run.
B)  increases real but not nominal variables.Most economists think that monetary neutrality is a good description of the long run.
C)  increases nominal but not real variables.Most economists think that monetary neutrality is a good description of the short run.
D)  increases nominal but not real variables.Most economists think that monetary neutrality is a good description of the long run.E) None of the above
F) A) and C)

Question 11

You find that to attract a sufficient number of workers you have to pay them more dollars.Given the price of your output you determine you are paying your workers more in goods than before.Which of the following has risen?

Accepted Answer

A)  The real and nominal value of the wages you pay.
B)  The real but not the nominal value of wages you pay.
C)  The nominal but not the real value of the wages you pay.
D)  Neither the real nor the nominal value of the wages you pay.E) None of the above
F) A) and B)

Question 12

Velocity is computed as the

Accepted Answer

A)  price level times real GDP divided by the money supply.
B)  price level times the money supply divided by real GDP.
C)  real GDP times the money supply divided by the price level.
D)  real GDP times the money supply divided by the rate at which money changes hands.E) C) and D)
F) B) and D)

Question 13

Kelly puts money in a savings account.One year later she has two percent more dollars and can buy three percent more goods.Kelly earned a real interest rate of

Accepted Answer

A)  two percent and prices fell one percent.
B)  two percent and prices rose one percent.
C)  three percent and prices rose one percent.
D)  three percent and prices fell one percent.E) All of the above
F) C) and D)

Question 14

If a bank posts a nominal interest rate of 4 percent,and inflation is expected to be 3 percent,then

Accepted Answer

A)  the expected real interest rate is 7 percent.
B)  the expected real interest rate is 1 percent.
C)  the expected real interest rate is 1.33 percent.
D)  the expected real interest rate is 12 percent.E) A) and B)
F) None of the above

Question 15

If the CPI rises,the number of dollars needed to buy a representative basket of goods

Accepted Answer

A)  increases,and so the value of money rises.
B)  increases,and so the value of money falls.
C)  decreases,and so the value of money rises.
D)  decreases,and so the value of money fallsE) B) and D)
F) B) and C)

Question 16

According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then

Accepted Answer

A)  both the price level and nominal GDP would rise by 5 percent.
B)  the price level would rise by 5 percent and nominal GDP would be unchanged.
C)  the price level would be unchanged and nominal GDP would rise by 5 percent.
D)  both the price level and nominal GDP would be unchanged.E) B) and C)
F) A) and B)

Question 17

The money supply in Muckland is $100 billion.Nominal GDP is $800 billion and real GDP is $200 billion.What are the price level and velocity in Muckland?

Accepted Answer

A)  The price level and velocity are both 8.
B)  The price level is 2 and velocity is 8.
C)  The price level and velocity are both 4.
D)  The price level is 4 and velocity is 8.E) B) and C)
F) A) and B)

Question 18

When we assume that the supply of money is a variable that the central bank controls,we

Accepted Answer

A)  must then assume as well that the demand for money is not influenced by the value of money.
B)  must then assume as well that the price level is unrelated to the value of money.
C)  are ignoring the fact that,in the real world,households are also suppliers of money.
D)  are ignoring the complications introduced by the role of the banking system.E) B) and D)
F) All of the above

Question 19

Money demand depends on

Accepted Answer

A)  the price level and the interest rate.
B)  the price level but not the interest rate.
C)  the interest rate but not the price level.
D)  neither the price level nor the interest rate.E) B) and C)
F) B) and D)

Question 20

The primary reason people hold money is

Accepted Answer

A)  to keep wealth in a less liquid form.
B)  to use it as a medium of exchange.
C)  to use it for investment.
D)  to earn interest.E) B) and D)
F) B) and C)

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

Other things the same,a decrease in velocity means that

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Suppose the price level rises,but the number of dollars you are paid per hour stays the same.This means that your

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Velocity is computed as the

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If the CPI rises,the number of dollars needed to buy a representative basket of goods

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When we assume that the supply of money is a variable that the central bank controls,we

Correct AnswerverifiedShow Answer

If a bank posts a nominal interest rate of 4 percent,and inflation is expected to be 3 percent,then

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The money supply in Muckland is $100 billion.Nominal GDP is $800 billion and real GDP is $200 billion.What are the price level and velocity in Muckland?

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The primary reason people hold money is

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Money demand depends on

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During the 2008 financial crisis velocity decreased.This means that the rate at which money changed hands

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According to the assumptions of the quantity theory of money,if the money supply increases 5 percent,then

Correct AnswerverifiedShow Answer

If monetary neutrality holds,then an increase in the money supply

Correct AnswerverifiedShow Answer

You find that to attract a sufficient number of workers you have to pay them more dollars.Given the price of your output you determine you are paying your workers more in goods than before.Which of the following has risen?

Correct AnswerverifiedShow Answer

Kelly puts money in a savings account.One year later she has two percent more dollars and can buy three percent more goods.Kelly earned a real interest rate of

Correct AnswerverifiedShow Answer

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,if money supply and money demand both shift to the right

Correct AnswerverifiedShow Answer

On a Sunday morning,Tom sold 300 cups of coffee for a total of $750.

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed make the money supply

Correct AnswerverifiedShow Answer

If when the money supply changes,real output and velocity do not change,then a 2 percent increase in the money supply

Correct AnswerverifiedShow Answer

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.What quantity is measured along the vertical axis?

Correct AnswerverifiedShow Answer

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