1) You put money in the bank. The increase in the dollar value of your savings
a) and the change in the number of goods you can buy with your savings are both nominal variables.
b) and the change in the number of goods you can buy with your savings are bo
c) is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
2) The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?
a) the price level and velocity.
b) the price level but not velocity.
c) velocity but not the price level.
d) neither the price level nor velocity.
c) velocity but not the price level.
3) When inflation rises, people
a) make less frequent trips to the bank and firms make less frequent price changes.
b) make less frequent trips to the bank while firms make more frequent price changes.
c)make more frequent trips to the bank while firms ma
d) make more frequent trips to the bank and firms make more frequent price changes.
3.1) When inflation falls, people
a) make less frequent trips to the bank and firms make less frequent price changes.
b) make less frequent trips to the bank while firms make more frequent price changes.
c) make more frequent trips to the bank while firms
a) make less frequent trips to the bank and firms make less frequent price changes.
4) In the U.S., people are required to pay taxes on
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 nomina
a) nominal interest earnings, irrespective of their real interest earnings.
5) When the money supply curve shifts from MS1 to MS2,
a) the demand for goods and services decreases.
b) the economy's ability to produce goods and services increases.
c) the equilibrium price level decreases.
d) None of the above is correct.
d) None of the above is correct.
Correct answer:
The equilibrium value of money decreases.
6) In the U.S., taxes on capital gains are computed using
a) nominal gains. This is one way by which higher inflation discourages saving.
b) nominal gains. This is one way by which higher inflation encourages saving.
c) real gains. This is one way by whic
a) nominal gains. This is one way by which higher inflation discourages saving.
7) Printing money to finance government expenditures
a) causes the value of money to rise.
b) imposes a tax on everyone who holds money.
c) is the principal method by which the U.S. government finances its expenditures.
d) causes prices to fall.
b) imposes a tax on everyone who holds money.
8) When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess
a) supply of money, causing people to spend more.
b) supply of money, causing people to spend less.
c) demand for money, caus
a) supply of money, causing people to spend more.
9) According to the classical dichotomy, when the money supply doubles, which of the following also doubles?
a) the price level and nominal wages
b) the price level, but not the nominal wage
c) the nominal wage, but not the price level
d) neither the nomi
a) the price level and nominal wages
10) When inflation rises, people will desire to hold
a) less money and will go to the bank less frequently.
b) less money and will go to the bank more frequently.
c) more money and will go to the bank less frequently.
d) more money and will go to the bank
b) less money and will go to the bank more frequently.