Question 1

When the money market is drawn with the value of money on the vertical axis, the price level increases if

Accepted Answer

A)   money demand shifts right and decreases if money supply shifts right.
B)   money demand shifts right and decreases if money supply shifts left.
C)   money demand shifts left and decreases if money supply shifts right.
D)   money demand shifts left and decreases if money supply shifts left.E) A) and D)
F) B) and D)

Question 2

In the U.S., people are required to pay taxes on

Accepted Answer

A)   nominal interest earnings, irrespective of their real interest earnings.
B)   real interest earnings, irrespective of their nominal interest earnings.
C)   real capital gains, irrespective of their nominal capital gains.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 3

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Accepted Answer

A)   movement to the right along the money demand curve.
B)   movement to the left along the money demand curve.
C)   shift to the right of the money supply curve.
D)   shift to the left of the money supply curve.E) All of the above
F) A) and D)

Question 4

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) C) and D)
F) None of the above

Question 5

Other things the same, an increase in velocity means that

Accepted Answer

A)   transactions per dollar increase so the price level rises.
B)   transactions per dollar increase so the price level falls.
C)   transactions per dollar decrease so the price level rises.
D)   transactions per dollar decrease so the price level falls.E) All of the above
F) B) and C)

Question 6

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Accepted Answer

A)   either a rise in output or a rise in the rate at which money changes hands.
B)   either a rise in output or a fall in the rate at which money changes hands.
C)   either a fall in output or a rise in the rate at which money changes hands.
D)   either a fall in output or a fall in the rate at which money changes hands.E) A) and B)
F) B) and C)

Question 7

Menu costs refers to

Accepted Answer

A)   resources used by people to maintain lower money holdings when inflation is high.
B)   resources used to price shop during times of high inflation.
C)   the distortion in incentives created by inflation when taxes do not adjust for inflation.
D)   the cost of more frequent price changes induced by higher inflation.E) All of the above
F) None of the above

Question 8

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Accepted Answer

increases, a movemen...

Question 9

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

Accepted Answer

A)   the real wage.
B)   the real interest rate.
C)   the nominal interest rate.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 10

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Accepted Answer

A)   the quantity of money demanded and the quantity of money supplied
B)   the quantity of money demanded but not the quantity of money supplied
C)   the quantity of money supplied but not the quantity of money demanded
D)   neither the quantity of money supplied nor the quantity of money demandedE) B) and D)
F) A) and C)

Question 11

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. If the relevant money-supply curve is the one labeled MS2, then

Accepted Answer

A)   when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.
B)   when the money market is in equilibrium, one unit of goods and services sells for 33 cents.
C)   there is an excess demand for money if the value of money in terms of goods and services is 0.5.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 12

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before­tax real capital gain?

Accepted Answer

A)   $1,300 - $1,0001.05)  and this is the gain he is to report on his income tax
B)   $1,300 - $1,0001.05)  but he is to report a $300 gain on his income tax
C)   $1,300 - $1,0001.07)  and this is the gain he is to report on his income tax
D)   $1,300 - $1,0001.07)  but he is to report a $300 gain on his income taxE) None of the above
F) B) and D)

Question 13

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) B) and D)
F) A) and B)

Question 14

As the price level decreases, the value of money

Accepted Answer

A)   increases, so people must hold less money to purchase goods and services.
B)   increases, so people must hold more money to purchase goods and services.
C)   decreases, so people must hold more money to purchase goods and services.
D)   decreases, so people must hold less money to purchase goods and services.E) All of the above
F) A) and B)

Question 15

Monetary neutrality means that a change in the money supply

Accepted Answer

A)   does not change real variables. Most economists think this is a good description of the economy in the short run and in the long run.
B)   does not change real variables. Most economists think this is a good description of the economy in the long run but not the short run.
C)   does not change nominal variables. Most economists think this is a good description of the economy in the short-run and the long run.
D)   does not change nominal variables. Most economists think this is a good description of the economy in the long run but not the short run.E) C) and D)
F) A) and B)

Question 16

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 20,000 for the year. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay for a newly produced good or service?

Accepted Answer

A)   4
B)   2
C)   8
D)   10E) B) and D)
F) A) and B)

Question 17

Real GDP measures output of final goods and services in physical units.

Accepted Answer

A) True 
 B)False

Question 18

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

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) None of the above
F) B) and C)

Question 19

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) All of the above
F) B) and D)

Question 20

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010? A)  -33 percent B)  17 percent C)  50 percent D)  67 percent" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-3. At the end of 2009 the relevant money-supply curve was the one labeled MS1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Accepted Answer

A)   -33 percent
B)   17 percent
C)   50 percent
D)   67 percentE) B) and D)
F) None of the above

Exam 22: Money Growth and Inflation

Other things the same, a decrease in velocity means that

Correct Answer
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Other things the same, an increase in velocity means that

Correct Answer
verified

Open-market purchases by the Fed make the money supply

Correct Answer
verified

As the price level decreases, the value of money

Correct Answer
verified

Real GDP measures output of final goods and services in physical units.

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's beforetax real capital gain?

Correct Answer
verified

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

Correct Answer
verified

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. If the relevant money-supply curve is the one labeled MS2, then

Correct Answer
verified

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

Correct Answer
verified

Monetary neutrality means that a change in the money supply

Correct Answer
verified

A decrease in the value of money the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

Correct Answer
verified
increases, a movemen...
View Answer

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Correct Answer
verified

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Correct Answer
verified

Menu costs refers to

Correct Answer
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Correct Answer
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In the U.S., people are required to pay taxes on

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Correct Answer
verified

When the money market is drawn with the value of money on the vertical axis, the price level increases if

Correct Answer
verified

Exam 22: Money Growth and Inflation

Other things the same, a decrease in velocity means that

Correct AnswerverifiedShow Answer

Other things the same, an increase in velocity means that

Correct AnswerverifiedShow Answer

Open-market purchases by the Fed make the money supply

Correct AnswerverifiedShow Answer

As the price level decreases, the value of money

Correct AnswerverifiedShow Answer

Real GDP measures output of final goods and services in physical units.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's before­tax real capital gain?

Correct AnswerverifiedShow Answer

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

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. If the relevant money-supply curve is the one labeled MS2, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Monetary neutrality means that a change in the money supply

Correct AnswerverifiedShow Answer

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Correct Answerverifiedincreases, a movemen...View AnswerShow Answer

When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?

Correct AnswerverifiedShow Answer

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

Correct AnswerverifiedShow Answer

Menu costs refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the U.S., people are required to pay taxes on

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis, the price level increases if

Correct AnswerverifiedShow Answer

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Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0. What is Harvey's beforetax real capital gain?

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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A decrease in the value of money the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

Correct Answer
verified
increases, a movemen...
View Answer

Correct Answer
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Correct Answer
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