Question 1

The country of Robinya has a tax system identical to that of the United States. Suppose someone in Robinya bought a parcel of land for 10,000 deera the local currency)  in 1970 when the price index equaled 100. In 2010, the person sold the land for 100,000 deera, and the price index equaled 500. The tax rate on nominal capital gains was 20 percent. Compute the taxes the person paid on the nominal gain and the change in the real value of the land in terms of 2010 prices to find the after-tax real rate of capital gain.

Accepted Answer

A)   -20 percent
B)   20 percent
C)   42 percent
D)   64 percentE) A) and C)
F) B) and D)

Question 2

Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain?

Accepted Answer

A)   $50
B)   $75
C)   $100
D)   $200E) B) and C)
F) C) and D)

Question 3

Identify each of the following as nominal or real variables.
a. the physical output of goods and services
b. the overall price level
c. the dollar price of apples
d. the price of apples relative to the price of oranges
e. the unemployment rate
f. the amount that shows up on your paycheck after taxes
g. the amount of goods you can purchase with the wage you get each hour
h. the taxes that you pay the government
d. the price of apples relative to the price of oranges
e. the unemployment rate

Accepted Answer

a. real variable
b. nominal va...

Question 4

The supply of money increases when

Accepted Answer

A)   the value of money increases.
B)   the interest rate increases.
C)   the Federal Reserve purchases bonds.
D)   velocity increases.E) All of the above
F) C) and D)

Question 5

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

Accepted Answer

A)   both the nominal and the real interest rate rise.
B)   neither the nominal nor the real interest rate rise.
C)   the nominal interest rate rises, but the real interest rate does not.
D)   the real interest rate rises, but the nominal interest rate does not.E) B) and D)
F) B) and C)

Question 6

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if:
a. the Fed increases the money supply.
b. people decide to demand less money at each value of money.

Accepted Answer

a. The Fed increases the money supply. W...

Question 7

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest...

Question 8

The increase in the overall level of prices is known as ______.

Accepted Answer

The answer of The increase in the overall level of...

Question 9

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Accepted Answer

A)   $4,000.
B)   $2,250.
C)   $250.
D)   $36,000.E) B) and C)
F) A) and B)

Question 10

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Accepted Answer

A)   money growth must have been greater than the growth of real income.
B)   money growth must have been less than the growth of real income.
C)   prices fell during the 1970's.
D)   output fell during the 1970's.E) A) and D)
F) A) and C)

Question 11

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Accepted Answer

A) True 
 B)False

Question 12

In the long run, money demand and money supply determine

Accepted Answer

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

Question 13

If inflation is lower than what was expected,

Accepted Answer

A)   creditors receive a lower real interest rate than they had anticipated.
B)   creditors pay a lower real interest rate than they had anticipated.
C)   debtors receive a higher real interest rate than they had anticipated.
D)   debtors pay a higher real interest rate than they had anticipated.E) A) and B)
F) B) and D)

Question 14

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Accepted Answer

A)   velocity rose. If monetary neutrality holds the rise in velocity increased the ratio M/P.
B)   velocity rose. If monetary neutrality holds the rise in velocity decreased the ratio M/P.
C)   velocity fell. If monetary neutrality holds the fall in velocity increased the ratio M/P.
D)   velocity fell. If monetary neutrality holds the fall in velocity decreased the ratio M/P.E) A) and B)
F) A) and D)

Question 15

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) All of the above

Question 16

According to the classical dichotomy, when the money supply doubles which of the following doubles?

Accepted Answer

A)   the price level and nominal GDP
B)   the price level and real GDP
C)   only real GDP
D)   only the price levelE) All of the above
F) B) and C)

Question 17

In which case is velocity the highest?

Accepted Answer

A)   the price level equals 4, the money supply equals 5,000, and output equals 20,000.
B)   the price level equals 4, the money supply equals 20,000 and output equals 5,000.
C)   the price level equals 2, the money supply equals 5,000, and output equals 20,000.
D)   the price level equals 2, the money supply equals 20,000 and output equals 5,000.E) None of the above
F) A) and D)

Question 18

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Accepted Answer

A)   the price level would fall, so the value of money would fall.
B)   the price level would fall, so the value of money would rise.
C)   the price level would rise, so the value of money would fall.
D)   the price level would rise, so the value of money would rise.E) C) and D)
F) None of the above

Question 19

When money is neutral, which of the following increases when the money supply growth rate increases?

Accepted Answer

A)   real output growth
B)   real interest rates
C)   nominal interest rates
D)   the money supply divided by the price levelE) A) and D)
F) B) and C)

Question 20

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Accepted Answer

A)   Unemployment
B)   Productivity
C)   Inflation
D)   Monetary policyE) C) and D)
F) A) and D)

Exam 22: Money Growth and Inflation

In which case is velocity the highest?

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

If inflation is lower than what was expected,

Correct Answer
verified

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Correct Answer
verified

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

Correct Answer
verified

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

Correct Answer
verified

The increase in the overall level of prices is known as ______.

Correct Answer
verified

In the long run, money demand and money supply determine

Correct Answer
verified

According to the classical dichotomy, when the money supply doubles which of the following doubles?

Correct Answer
verified

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Correct Answer
verified

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Correct Answer
verified

The supply of money increases when

Correct Answer
verified

Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain?

Correct Answer
verified

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Correct Answer
verified

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct Answer
verified
Inflation and nominal interest...
View Answer

Correct Answer
verified

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Correct Answer
verified

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Fed increases the money supply. b. people decide to demand less money at each value of money.

Correct Answer
verified
a. The Fed increases the money supply. W...
View Answer

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct Answer
verified

When money is neutral, which of the following increases when the money supply growth rate increases?

Correct Answer
verified

Exam 22: Money Growth and Inflation

In which case is velocity the highest?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. real variableb. nominal va...View AnswerShow Answer

If inflation is lower than what was expected,

Correct AnswerverifiedShow Answer

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

Correct AnswerverifiedShow Answer

The increase in the overall level of prices is known as ______.

Correct AnswerverifiedShow Answer

In the long run, money demand and money supply determine

Correct AnswerverifiedShow Answer

According to the classical dichotomy, when the money supply doubles which of the following doubles?

Correct AnswerverifiedShow Answer

Studies have found which of the following economic terms mentioned most often in U.S. newspapers?

Correct AnswerverifiedShow Answer

There is evidence that the rate at which money changed hands rose during the German hyperinflation. This means that

Correct AnswerverifiedShow Answer

The supply of money increases when

Correct AnswerverifiedShow Answer

Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain?

Correct AnswerverifiedShow Answer

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Correct AnswerverifiedShow Answer

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct AnswerverifiedInflation and nominal interest...View AnswerShow Answer

Correct AnswerverifiedShow Answer

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the Quantity Equation, we conclude that

Correct AnswerverifiedShow Answer

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Fed increases the money supply. b. people decide to demand less money at each value of money.

Correct Answerverifieda. The Fed increases the money supply. W...View AnswerShow Answer

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M =

Correct AnswerverifiedShow Answer

When money is neutral, which of the following increases when the money supply growth rate increases?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
a. real variable
b. nominal va...
View Answer

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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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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Correct Answer
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Correct Answer
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Correct Answer
verified
Inflation and nominal interest...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. The Fed increases the money supply. W...
View Answer

Correct Answer
verified

Correct Answer
verified