When prices are falling, economists say that there is
disinflation.
deflation.
a contraction.
an inverted inflation.
deflation.
The term hyperinflation refers to
the spread of inflation from one country to others.
a decrease in the inflation rate.
a period of very high inflation.
inflation accompanied by a recession.
a period of very high inflation.
The value of money falls as the price level
rises, because the number of dollars needed to buy a representative basket of goods rises.
rises, because the number of dollars needed to buy a representative basket of goods falls.
falls, because the number of
rises, because the number of dollars needed to buy a representative basket of goods rises
If P denotes the price of goods and services measured in terms of money, then
1/P represents the value of money measured in terms of goods and services.
P can be regarded as the "overall price level."
an increase in the value of money is associated with a
All of the above are correct
If M = 3,000, P = 2, and Y = 12,000, what is velocity?
1/2
2
4
8
8
If velocity = 5, the price level = 1.5, and the real value of output is 2,500, then the quantity of money is
333.33.
750.00.
1,050.00.
8,333.33.
750.00.
According to the quantity theory of money, a 2 percent increase in the money supply
causes the price level to fall by 2 percent.
leaves the price level unchanged.
causes the price level to rise by less than 2 percent.
causes the price level to rise by 2 p
causes the price level to rise by 2 percent.
If the nominal interest rate is 8 percent and expected inflation is 3.5 percent, then what is the real interest rate?
11.5 percent
7.5 percent
4.5 percent
2.5 percent
4.5 percent
The supply of money is determined by
the price level.
the Treasury and Congressional Budget Office.
the Federal Reserve System.
the demand for money.
the Federal Reserve System.
The supply of money increases when
the value of money increases.
the interest rate increases.
the Fed makes open-market purchases.
None of the above is correct.
the Fed makes open-market purchases.
Money demand refers to
the total quantity of financial assets that people want to hold.
how much income people want to earn per year.
how much wealth people want to hold in liquid form.
how much currency the Federal Reserve decides to print.
how much wealth people want to hold in liquid form.
If the Fed increases the money supply, then 1/P
falls, so the value of money falls.
falls, so the value of money rises.
rises, so the value of money falls.
rises, so the value of money rises
falls, so the value of money falls.
Refer to Figure 17-1. If the money supply is MS2 and the value of money is 2, then
the value of money is lower than its equilibrium level.
the price level is higher than its equilibrium level.
the quantity of money demanded is greater than the quantity of
the quantity of money supplied is greater than the quantity of money demanded.
Interest rates adjusted for the effects of inflation
and inflation are nominal variables.
and inflation are real variables.
are real variables; inflation is a nominal variable.
are nominal variables; inflation is a real variable.
are real variables; inflation is a nominal variable
When inflation rises, people tend to go to the bank
more often, giving rise to menu costs.
more often, giving rise to shoeleather costs.
less often, giving rise to redistribution costs.
less often, thereby lessening the severity of the inflation tax.
more often, giving rise to shoeleather costs.
The costs of changing price tags and price listings are known as
inflation-induced tax distortions.
relative-price variability costs.
shoeleather costs.
menu costs.
menu costs.
If the economy unexpectedly went from inflation to deflation,
both debtors and creditors would have reduced real wealth.
both debtors and creditors would have increased real wealth.
debtors would gain at the expense of creditors.
creditors would gain at t
creditors would gain at the expense of debtors.
When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve buys bonds, then the money supply curve
shifts rightward, causing the price level to rise.
shifts rightward, causing the price level to fall.
shifts leftwa
shifts rightward, causing the price level to rise.
The inflation tax refers to
the revenue a government creates by printing money.
higher inflation which requires more frequent price changes.
the idea that, other things the same, an increase in the tax rate raises the inflation rate.
taxes being indexed f
the revenue a government creates by printing money.
When the money market is drawn with the value of money on the vertical axis, if the money supply rises
the price level and the value of money rise.
the price level rises and the value of money falls.
the price level falls and the value of money rises.
the
the price level rises and the value of money falls.
Open-market purchases by the Fed make the money supply
increase, which makes the value of money increase.
increase, which makes the value of money decrease.
decrease, which makes the value of money decrease.
decrease, which makes the value of money increa
increase, which makes the value of money decrease.
Refer to Figure 17-1. If the money supply is MS2 and the value of money is 2, then there is an excess
demand for money that is represented by the distance between points A and C.
demand for money that is represented by the distance between points A and B.
supply of money that is represented by the distance between points A and B.
Refer to Figure 17-2. If the relevant money-demand curve is the one labeled MD1, then the equilibrium value of money is
Figure 17-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the a
0.5 and the equilibrium price level is 2.
Refer to Figure 17-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 3. If the money market is in equilibrium, then the economy's real GDP amounts to
Figure 17-2. On the graph, MS represents the money
7,500.
Refer to Figure 17-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay fo
12
Refer to Figure 17-3. Suppose the relevant money-supply curve is the one labeled MS2; also suppose the economy's real GDP is 45,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately
Figure 17-3. On the graph,
9.0
Economic variables whose values are measured in goods are called
dichotomous variables.
nominal variables.
classical variables.
real variables.
real variables.
The price level is a
relative variable.
dichotomous variable
real variable.
nominal variable.
nominal variable.
The classical dichotomy argues that changes in the money supply
affect both nominal and real variables.
affect neither nominal nor real variables.
affect nominal variables, but not real variables.
do not affect nominal variables, but do affect real variab
affect nominal variables, but not real variables.
Monetary neutrality implies that an increase in the quantity of money will
increase employment.
increase the price level.
increase the incentive to save.
not increase any of the above
increase the price level.
According to the quantity equation, if P = 4 and Y = 450, then which of the following pairs of values are possible?
M = 800, V = 4
M = 600, V =3
M = 400, V =2
M = 200, V =1
M = 600, V =3
Printing money to finance government expenditures
causes the value of money to rise.
imposes a tax on everyone who holds money.
is the principal method by which the U.S. government finances its expenditures.
None of the above is correct.
imposes a tax on everyone who holds money.
The Fisher effect says that
the nominal interest rate adjusts one for one with the inflation rate.
the growth rate of the money supply is negatively related to the velocity of money.
real variables are heavily influenced by the monetary system.
All of the
the nominal interest rate adjusts one for one with the inflation rate.