Question 1

If the price level last year was 106 and this year is 102, then the inflation rate between last period and this period was:

Accepted Answer

A)  -3.8%
B)  4%.
C)  3.8%
D)  -3.9%.

Question 2

Real revenue from printing money is approximately:

Accepted Answer

A)  the nominal interest rate times real money balances.
B)  the money growth rate times real money balances.
C)  the real interest rate times nominal money balances.
D)  the money growth rate times nominal money balances.

Question 3

In the market clearing model, an increase in the money growth rate leads to an increase in the inflation rate.

Accepted Answer

A) True 
 B)False

Question 4

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 5%, then we would expect the nominal interest rate to be:

Accepted Answer

A)  10%.
B)  7%.
C)  zero.
D)  2%.

Question 5

The real rate of interest is the nominal rate of interest less the expected inflation rate.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the money growth rate in the market clearing model causes:

Accepted Answer

A)  a decrease in the nominal interest rate.
B)  an increase in money demand.
C)  an increase in the inflation rate.
D)  all of the above.

Question 7

The nominal rate of interest on money is:

Accepted Answer

A)  positive.
B)  real rate of return on money plus the inflation rate.
C)  minus the inflation rate.
D)  all of the above.

Question 8

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 5%, then we would expect the inflation rate to be:

Accepted Answer

A)  10%.
B)  7%.
C)  5%.
D)  2%.

Question 9

If the expected inflation rate is 5% and the unexpected inflation rate is 4%, then the actual inflation rate is:

Accepted Answer

A)  1%.
B)  9%.
C)  -1%.
D)  1.25%.

Question 10

A decrease in the money growth rate in the market clearing model causes:

Accepted Answer

A)  an increase in the nominal interest rate.
B)  a decrease in money demand.
C)  an increase in the inflation rate.
D)  all of the above.

Question 11

An increase in the money growth rate in the market clearing model causes:

Accepted Answer

A)  an increase in the nominal interest rate.
B)  a decrease in money demand.
C)  an increase in the price level.
D)  all of the above.

Question 12

What happens in the market clearing model when the money growth rate increases?

Accepted Answer

When the money growth rate increases, so...

Question 13

If the expected inflation rate is 3% and the actual inflation rate is 5%, then the unexpected inflation rate is:

Accepted Answer

A)  2%.
B)  8%.
C)  -2%.
D)  1.67%.

Question 14

The nominal rate of interest on money is:

Accepted Answer

A)  zero.
B)  real rate of return on money less the inflation rate.
C)  minus the inflation rate.
D)  all of the above.

Question 15

The expected rate of inflation is:

Accepted Answer

A)  the real rate of interest less the nominal rate of interest.
B)  the nominal interest rate on nominal bonds less the interest rate on indexed bonds.
C)  the nominal rate of interest plus the real rate of interest.
D)  the interest rate on indexed bonds less the nominal interest rate on nominal bonds.

Question 16

The actual inflation rate is:

Accepted Answer

A)  the change in the price level divided by the original price level.
B)  The original price level divided the change in price level.
C)  the original price level divided by the new price level.
D)  the new price level divided by the original price level.

Question 17

A decrease in the money growth rate in the market clearing model causes:

Accepted Answer

A)  a decrease in the nominal interest rate.
B)  an increase in money demand.
C)  a decrease in the inflation rate.
D)  all of the above.

Question 18

Lump sum transfers for money growth implies:

Accepted Answer

A)  we need to analyze how transfer affects GDP.
B)  we do not have to analyze how households adjust their behavior to attract transfers.
C)  we need to analyze how transfers affect capital.
D)  we need to model how households adjust their behavior to attract transfers.

Question 19

A decrease in the money growth rate in the market clearing model causes:

Accepted Answer

A)  an increase in the nominal interest rate.
B)  an increase in money demand.
C)  an increase in the price level.
D)  all of the above.

Question 20

The real rate of interest on money is:

Accepted Answer

A)  zero.
B)  the nominal rate of return on money plus the inflation rate.
C)  minus the inflation rate.
D)  all of the above.

Exam 12: Inflation, Money Growth, and Interest Rates

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 5%, then we would expect the inflation rate to be:

Correct AnswerverifiedShow Answer

An increase in the money growth rate in the market clearing model causes:

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The real rate of interest is the nominal rate of interest less the expected inflation rate.

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The actual inflation rate is:

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The nominal rate of interest on money is:

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If the price level last year was 106 and this year is 102, then the inflation rate between last period and this period was:

Correct AnswerverifiedShow Answer

In the market clearing model, an increase in the money growth rate leads to an increase in the inflation rate.

Correct AnswerverifiedShow Answer

If the inflation rate is 3% and the nominal interest rate is 5% and the money growth rate increases to 5%, then we would expect the nominal interest rate to be:

Correct AnswerverifiedShow Answer

The real rate of interest on money is:

Correct AnswerverifiedShow Answer

A decrease in the money growth rate in the market clearing model causes:

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A decrease in the money growth rate in the market clearing model causes:

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What happens in the market clearing model when the money growth rate increases?

Correct AnswerverifiedWhen the money growth rate increases, so...View AnswerShow Answer

If the expected inflation rate is 5% and the unexpected inflation rate is 4%, then the actual inflation rate is:

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The expected rate of inflation is:

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An increase in the money growth rate in the market clearing model causes:

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Real revenue from printing money is approximately:

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The nominal rate of interest on money is:

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A decrease in the money growth rate in the market clearing model causes:

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Lump sum transfers for money growth implies:

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If the expected inflation rate is 3% and the actual inflation rate is 5%, then the unexpected inflation rate is:

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When the money growth rate increases, so...
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