Question 1

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) A) and B)
F) None of the above

Question 2

If Y and V are constant and M doubles,the quantity equation implies that the price level

Accepted Answer

A)  more than doubles.
B)  changes but less than doubles.
C)  doubles.
D)  does not changeE) A) and B)
F) A) and C)

Question 3

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) A) and D)
F) All of the above

Question 4

When the money market is drawn with the value of money on the vertical axis,if the price level is below the equilibrium level,there is an

Accepted Answer

A)  excess demand for money,so the price level will rise.
B)  excess demand for money,so the price level will fall.
C)  excess supply of money,so the price level will rise.
D)  excess supply of money,so the price level will fall.E) A) and D)
F) A) and C)

Question 5

The nominal interest rate is 6 percent and the inflation rate is 3 percent.What is the real interest rate?

Accepted Answer

A)  9 percent
B)  2 percent
C)  18 percent
D)  3 percentE) None of the above
F) A) and B)

Question 6

Most economists believe the principle of monetary neutrality is

Accepted Answer

A)  relevant to both the short and long run.
B)  irrelevant to both the short and long run.
C)  mostly relevant to the short run.
D)  mostly relevant to the long run.E) None of the above
F) A) and D)

Question 7

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1,then A) when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services. B) when the money market is in equilibrium,one unit of goods and services sells for 2 dollars. C) there is an excess demand for money if the value of money in terms of goods and services is 0.375. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

Accepted Answer

A)  when the money market is in equilibrium,one dollar purchases one-half of a basket of goods and services.
B)  when the money market is in equilibrium,one unit of goods and services sells for 2 dollars.
C)  there is an excess demand for money if the value of money in terms of goods and services is 0.375.
D)  All of the above are correct.E) C) and D)
F) A) and D)

Question 8

If V and M are constant and Y doubles,the quantity equation implies that the price level

Accepted Answer

A)  falls to half its original level.
B)  does not change.
C)  doubles.
D)  more than doubles.E) All of the above
F) A) and B)

Question 9

Figure 30-1 1 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." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 10

When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

Accepted Answer

A)  increases,so the quantity of money demanded increases.
B)  increases,so the quantity of money demanded decreases.
C)  decreases,so the quantity of money demanded decreases.
D)  decreases,so the quantity of money demanded increases.E) None of the above
F) A) and B)

Question 11

Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

Accepted Answer

A)  the inflation rate and growth of real GDP.
B)  the inflation rate but not the growth rate of real GDP.
C)  the growth rate of real GDP,but not the inflation rate.
D)  neither the inflation rate nor the growth rate of real GDP.E) B) and C)
F) A) and B)

Question 12

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. 1 to MS2? A) an increase in the value of money B) a decrease in the price level C) an open-market purchase of bonds by the Federal Reserve D) the Federal Reserve sells bonds." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-3.Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

Accepted Answer

A)  an increase in the value of money
B)  a decrease in the price level
C)  an open-market purchase of bonds by the Federal Reserve
D)  the Federal Reserve sells bonds.E) C) and D)
F) A) and B)

Question 13

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) B) and C)
F) None of the above

Question 14

If M = 6,000,P = 3,and Y = 3,000,what is velocity?

Accepted Answer

A)  6
B)  1.5
C)  0.67
D)  0.167E) All of the above
F) A) and D)

Question 15

If velocity and output were nearly constant,then

Accepted Answer

A)  the inflation rate would be much higher than the money supply growth rate.
B)  the inflation rate would be about the same as the money supply growth rate.
C)  the inflation rate would be much lower than the money supply growth rate.
D)  any of the above would be possible.E) A) and B)
F) B) and C)

Question 16

When the money market is drawn with the value of money on the vertical axis,if there is a shortage of money then

Accepted Answer

A)  the value of money rises which will make people desire to hold more money.
B)  the value of money rises which will make people desire to hold less money.
C)  the value of money falls which will make people desire to hold more money.
D)  the value of money falls which will make people desire to hold less money.E) B) and C)
F) A) and D)

Question 17

An assistant manager at a restaurant gets a $100 a month raise.He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.

Accepted Answer

A)  His real and nominal salary have risen.
B)  His real and nominal salary have fallen.
C)  His real salary has risen and his nominal salary has fallen.
D)  His real salary has fallen and his nominal salary has risen.E) C) and D)
F) B) and D)

Question 18

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

Accepted Answer

A)  nominal wages
B)  unemployment
C)  real GDP
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 19

Figure 30-1 1,then A) equilibrium exists when the value of money is 2. B) equilibrium exists when the equilibrium is at point D. C) equilibrium exists when the value of money is 1. D) there is excess demand if the value of money is 2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1.If the current money supply is MS1,then

Accepted Answer

A)  equilibrium exists when the value of money is 2.
B)  equilibrium exists when the equilibrium is at point D.
C)  equilibrium exists when the value of money is 1.
D)  there is excess demand if the value of money is 2.E) A) and C)
F) C) and D)

Question 20

Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

Accepted Answer

A)  6 times its old value.
B)  3 times its old value.
C)  1.5 times its old value.
D)  0.75 times its old valueE) All of the above
F) B) and C)

Exam 17: Money Growth and Inflation: The Classical Theory of Inflation

Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD1,then

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Suppose over some period of time the money supply tripled,velocity was unchanged,and real GDP doubled.According to the quantity equation the price level is now

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When the money market is drawn with the value of money on the vertical axis,if there is a shortage of money then

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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

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Most economists believe the principle of monetary neutrality is

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Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

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

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If Y and V are constant and M doubles,the quantity equation implies that the price level

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Figure 30-1 -Refer to Figure 30-1.If the current money supply is MS1,then

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If M = 6,000,P = 3,and Y = 3,000,what is velocity?

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When the money market is drawn with the value of money on the vertical axis,as the price level increases,the value of money

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If velocity and output were nearly constant,then

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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

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The nominal interest rate is 6 percent and the inflation rate is 3 percent.What is the real interest rate?

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Suppose that monetary neutrality and the Fisher effect both hold.An increase in the money supply growth rate increases

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

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When the money market is drawn with the value of money on the vertical axis,if the price level is below the equilibrium level,there is an

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Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS1 to MS2,

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An assistant manager at a restaurant gets a $100 a month raise.He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.

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If V and M are constant and Y doubles,the quantity equation implies that the price level

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Figure 30-2.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-2.If the relevant money-demand curve is the one labeled MD₁,then

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Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

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Figure 30-1 -Refer to Figure 30-1.If the current money supply is MS₁,then

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Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

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