Question 1

The relative price of oil is a(n) :

Accepted Answer

A)   actual variable
B)   monetary variable
C)   nominal variable
D)   real variable

Question 2

The supply of money is determined by:

Accepted Answer

A)   the value of money
B)   the price level
C)   the Reserve Bank
D)   the demand for money

Question 3

If the price level is above the equilibrium level, then:

Accepted Answer

A)   money demand will be greater than money supply
B)   money demand will be smaller than money supply
C)   money supply will be equal to money demand
D)   the price level will rise

Question 4

The inflation tax is exactly like other taxes levied when the government prints money.

Accepted Answer

A) True 
 B)False

Question 5

Graph 30-1
 2 to MS1: A)  the equilibrium price level increases B)  this may be due to the RBA selling government securities C)  this is due to the RBA buying government securities D)  the demand for goods and services increasing" class="answers-bank-image d-inline" rel="preload" >
-When the money supply curve in Graph 30-1 shifts from MS2 to MS1:

Accepted Answer

A)   the equilibrium price level increases
B)   this may be due to the RBA selling government securities
C)   this is due to the RBA buying government securities
D)   the demand for goods and services increasing

Question 6

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

Accepted Answer

A)   The real wage
B)   The nominal wage
C)   The real interest rate
D)   Real GDP

Question 7

What is the classical dichotomy, and to whom do we attribute it?

Accepted Answer

The classical dichotomy refers...

Question 8

Inflation is the increase in the overall level of prices.

Accepted Answer

A) True 
 B)False

Question 9

Paying for a government program by printing money:

Accepted Answer

A)   reduces the opportunity cost of the program
B)   is exactly like imposing an income tax to pay for the program
C)   imposes an inflation tax to pay for the program
D)   all of the above

Question 10

The evidence gained from studying hyperinflation indicates that:

Accepted Answer

A)   inflation rates parallel money supply growth rates
B)   nominal interest rates are independent of the money supply
C)   the rate of inflation is not closely related to the rate at which the money supply changes
D)   none of the above

Question 11

Which of the following statements is not correct when more money is created?

Accepted Answer

A)   The price level must rise
B)   The quantity of output must rise
C)   The velocity of money must fall
D)   None of the above

Question 12

What is the quantity equation, and how is it used to explain the equilibrium price level?

Accepted Answer

The quantity equation is M ? V = P ? Y, ...

Question 13

An increase in the money supply:

Accepted Answer

A)   increases the ability of the economy to produce goods and services, increases the demand for goods and services, and increases the price level
B)   leaves unchanged the ability of the economy to produce goods and services, increases the demand for goods and services and increases the price level
C)   leaves unchanged the ability of the economy to produce goods and services, increases the demand for goods and services and decreases the price level
D)   leaves unchanged the ability of the economy to produce goods and services, decreases the demand for goods and services, and decreases the price level

Question 14

The principle of monetary neutrality implies that an increase in the money supply will:

Accepted Answer

A)   decrease the price level
B)   lower nominal interest rates
C)   lower the unemployment rate
D)   not affect real interest rates

Question 15

If P is the price of goods and services measured in terms of money, then:

Accepted Answer

A)   P measures the value of money measured in terms of goods and services
B)   1/P measures the number of dollars needed to buy a basket of goods and services
C)   1/P measures the quantity of goods and services that can be bought with $1
D)   All of the above

Question 16

Real GDP measures:

Accepted Answer

A)   the dollar value of the economy's output of goods and services
B)   the total quantity of goods and services produced
C)   the total income received from producing goods and services in current dollars
D)   all of the above

Question 17

By reducing the cash rate in the US to almost zero per cent, what would critics of the Federal Reserve Bank (the Fed - The US central bank) believe about the Fed's ability to stimulate the economy?

Accepted Answer

By decreasing the interest rate to nearl...

Question 18

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Accepted Answer

A)   increase the nominal interest rate by 3percentage points
B)   increase the real interest rate by 3 percentage points
C)   decrease the nominal interest rate by 3 percentage points
D)   increase the nominal interest rate by less than 3 percentage points

Question 19

Calculate the velocity of money for each of the following situations:
a. The money supply is 1000, the price level is 20 and output is 200
b. The money supply is 50, the price level is 100 and output is 20
c. The money supply is 25, the price level is 25 and output is 200
d. The money supply is 800, the price level is 2 and output is 300

Accepted Answer

a. Velocity is 4.
b....

Question 20

Unexpected inflation has no wealth redistribution effect on the population.

Accepted Answer

A) True 
 B)False

Exam 30: Inflation: Its Causes and Costs

By reducing the cash rate in the US to almost zero per cent, what would critics of the Federal Reserve Bank (the Fed - The US central bank) believe about the Fed's ability to stimulate the economy?

Correct Answer
verified
By decreasing the interest rate to nearl...
View Answer

Paying for a government program by printing money:

Correct Answer
verified

Unexpected inflation has no wealth redistribution effect on the population.

Correct Answer
verified

Which of the following statements is not correct when more money is created?

Correct Answer
verified

Inflation is the increase in the overall level of prices.

Correct Answer
verified

Graph 30-1 -When the money supply curve in Graph 30-1 shifts from MS₂ to MS₁:

Correct Answer
verified

What is the classical dichotomy, and to whom do we attribute it?

Correct Answer
verified
The classical dichotomy refers...
View Answer

If the price level is above the equilibrium level, then:

Correct Answer
verified

An increase in the money supply:

Correct Answer
verified

The evidence gained from studying hyperinflation indicates that:

Correct Answer
verified

The principle of monetary neutrality implies that an increase in the money supply will:

Correct Answer
verified

What is the quantity equation, and how is it used to explain the equilibrium price level?

Correct Answer
verified
The quantity equation is M ? V = P ? Y, ...
View Answer

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Correct Answer
verified

The supply of money is determined by:

Correct Answer
verified

If P is the price of goods and services measured in terms of money, then:

Correct Answer
verified

Correct Answer
verified
a. Velocity is 4.
b....
View Answer

The inflation tax is exactly like other taxes levied when the government prints money.

Correct Answer
verified

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

Correct Answer
verified

Real GDP measures:

Correct Answer
verified

The relative price of oil is a(n) :

Correct Answer
verified

Exam 30: Inflation: Its Causes and Costs

By reducing the cash rate in the US to almost zero per cent, what would critics of the Federal Reserve Bank (the Fed - The US central bank) believe about the Fed's ability to stimulate the economy?

Correct AnswerverifiedBy decreasing the interest rate to nearl...View AnswerShow Answer

Paying for a government program by printing money:

Correct AnswerverifiedShow Answer

Unexpected inflation has no wealth redistribution effect on the population.

Correct AnswerverifiedShow Answer

Which of the following statements is not correct when more money is created?

Correct AnswerverifiedShow Answer

Inflation is the increase in the overall level of prices.

Correct AnswerverifiedShow Answer

Graph 30-1 -When the money supply curve in Graph 30-1 shifts from MS2 to MS1:

Correct AnswerverifiedShow Answer

What is the classical dichotomy, and to whom do we attribute it?

Correct AnswerverifiedThe classical dichotomy refers...View AnswerShow Answer

If the price level is above the equilibrium level, then:

Correct AnswerverifiedShow Answer

An increase in the money supply:

Correct AnswerverifiedShow Answer

The evidence gained from studying hyperinflation indicates that:

Correct AnswerverifiedShow Answer

The principle of monetary neutrality implies that an increase in the money supply will:

Correct AnswerverifiedShow Answer

What is the quantity equation, and how is it used to explain the equilibrium price level?

Correct AnswerverifiedThe quantity equation is M ? V = P ? Y, ...View AnswerShow Answer

When money is neutral, an increase in the rate of inflation from 2 per cent to 5 per cent will _____.

Correct AnswerverifiedShow Answer

The supply of money is determined by:

Correct AnswerverifiedShow Answer

If P is the price of goods and services measured in terms of money, then:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Velocity is 4.b....View AnswerShow Answer

The inflation tax is exactly like other taxes levied when the government prints money.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Real GDP measures:

Correct AnswerverifiedShow Answer

The relative price of oil is a(n) :

Correct AnswerverifiedShow Answer

Correct Answer
verified
By decreasing the interest rate to nearl...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Graph 30-1 -When the money supply curve in Graph 30-1 shifts from MS₂ to MS₁:

Correct Answer
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Correct Answer
verified
The classical dichotomy refers...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The quantity equation is M ? V = P ? Y, ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Velocity is 4.
b....
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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