Question 1

If an economy produces 2,000 units of output when the price level is $2 and the money supply is $1,000, what is the velocity of money?

Accepted Answer

A)   4
B)   500
C)   1
D)   2E) A) and B)
F) None of the above

Question 2

When an economy experiences deflation, investment decreases because:

Accepted Answer

A)   businesses do not want to take out loans that will increase in value over time.
B)   firms leverage lower prices to expand current production.
C)   interest rates increase.
D)   businesses would rather take out loans than spend cash.E) All of the above
F) B) and D)

Question 3

What effect does deflation have on consumption and investment?

Accepted Answer

A)   Deflation increases the rate of both consumption and investment.
B)   Deflation slows the rate of both consumption and investment.
C)   Deflation slows the rate of investment but increases the rate of consumption.
D)   Deflation causes firms and households to consume more and save less.E) All of the above
F) A) and D)

Question 4

As central banks conduct monetary policy, they inevitably affect only _______, with no lasting impact on _______ in the long run.

Accepted Answer

A)   prices; employment
B)   employment; prices
C)   output; prices
D)   demand; employmentE) B) and D)
F) All of the above

Question 5

If an economy produces 4,000 units of output when the price level is $2 and the velocity of money is 8, what is the money supply?

Accepted Answer

A)   $1,000
B)   $8,000
C)   $2,000
D)   $4,000E) C) and D)
F) A) and B)

Question 6

Which measure of inflation best reflects underlying trends in the economy?

Accepted Answer

A)   Core inflation
B)   Headline inflation
C)   The Producer Price Index
D)   The GDP deflatorE) A) and C)
F) B) and C)

Question 7

The natural rate of unemployment:

Accepted Answer

A)   occurs at the economy's potential level of output.
B)   is zero.
C)   will cause a steady rise in the price level.
D)   All of these are true.E) A) and C)
F) A) and D)

Question 8

The Phillips curve depicts that, in general, _______ amounts of unemployment in an economy will coincide with _______ inflation.

Accepted Answer

A)   high; low
B)   low; low
C)   high; high
D)   low; negativeE) B) and C)
F) A) and B)

Question 9

Unexpected high inflation redistributes wealth from:

Accepted Answer

A)   those who save to those who borrow.
B)   those who borrow to those who save.
C)   those who borrow to banks.
D)   banks to those who save.E) None of the above
F) All of the above

Question 10

If an economy produces 3,000 units of output when the price level is $2 and the money supply is $2,000, what is the velocity of money?

Accepted Answer

A)   2
B)   3
C)   67
D)   150E) A) and B)
F) B) and C)

Question 11

If the real rate of return is 5 percent and the inflation rate is 2 percent, the nominal interest rate is:

Accepted Answer

A)   7 percent.
B)   3 percent.
C)   −3 percent.
D)   −7 percent.E) B) and C)
F) All of the above

Exam 16: Inflation

The Phillips curve depicts that, in general, _ amounts of unemployment in an economy will coincide with _ inflation.

Correct Answer
verified

Unexpected high inflation redistributes wealth from:

Correct Answer
verified

As central banks conduct monetary policy, they inevitably affect only _, with no lasting impact on _ in the long run.

Correct Answer
verified

The natural rate of unemployment:

Correct Answer
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Which measure of inflation best reflects underlying trends in the economy?

Correct Answer
verified

If an economy produces 4,000 units of output when the price level is $2 and the velocity of money is 8, what is the money supply?

Correct Answer
verified

When an economy experiences deflation, investment decreases because:

Correct Answer
verified

What effect does deflation have on consumption and investment?

Correct Answer
verified

If an economy produces 2,000 units of output when the price level is $2 and the money supply is $1,000, what is the velocity of money?

Correct Answer
verified

If an economy produces 3,000 units of output when the price level is $2 and the money supply is $2,000, what is the velocity of money?

Correct Answer
verified

If the real rate of return is 5 percent and the inflation rate is 2 percent, the nominal interest rate is:

Correct Answer
verified

Exam 16: Inflation

The Phillips curve depicts that, in general, _______ amounts of unemployment in an economy will coincide with _______ inflation.

Correct AnswerverifiedShow Answer

Unexpected high inflation redistributes wealth from:

Correct AnswerverifiedShow Answer

As central banks conduct monetary policy, they inevitably affect only _______, with no lasting impact on _______ in the long run.

Correct AnswerverifiedShow Answer

The natural rate of unemployment:

Correct AnswerverifiedShow Answer

Which measure of inflation best reflects underlying trends in the economy?

Correct AnswerverifiedShow Answer

If an economy produces 4,000 units of output when the price level is $2 and the velocity of money is 8, what is the money supply?

Correct AnswerverifiedShow Answer

When an economy experiences deflation, investment decreases because:

Correct AnswerverifiedShow Answer

What effect does deflation have on consumption and investment?

Correct AnswerverifiedShow Answer

If an economy produces 2,000 units of output when the price level is $2 and the money supply is $1,000, what is the velocity of money?

Correct AnswerverifiedShow Answer

If an economy produces 3,000 units of output when the price level is $2 and the money supply is $2,000, what is the velocity of money?

Correct AnswerverifiedShow Answer

If the real rate of return is 5 percent and the inflation rate is 2 percent, the nominal interest rate is:

Correct AnswerverifiedShow Answer

The Phillips curve depicts that, in general, _ amounts of unemployment in an economy will coincide with _ inflation.

Correct Answer
verified

Correct Answer
verified

As central banks conduct monetary policy, they inevitably affect only _, with no lasting impact on _ in the long run.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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