Question 1

On income tax forms,people are required to report

Accepted Answer

A)  nominal interest earnings.
B)  real interest earnings.
C)  real capital gains.
D)  All of the above.E) B) and D)
F) B) and C)

Question 2

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Accepted Answer

Inflation and nominal interest...

Question 3

Nominal GDP measures

Accepted Answer

A)  the total quantity of final goods and services produced.
B)  the dollar value of the economy's output of final goods and services.
C)  the total income received from producing final goods and services measured in constant dollars.
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 4

In the fourteenth century,the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold,which was in use as a medium of exchange.We would predict that this increase in gold

Accepted Answer

A)  raised both the price level and the value of gold in Cairo.
B)  raised the price level, but decreased the value of gold in Cairo.
C)  lowered the price level, but increased the value of gold in Cairo.
D)  lowered both the price level and the value of gold in Cairo.E) None of the above
F) A) and C)

Question 5

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if:
a.the Fed increases the money supply.
b.people decide to demand less money at each value of money.

Accepted Answer

a. The Fed increases the money supp...

Question 6

Use the figure below for the following questions.
Figure 30-1
 
-Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

Accepted Answer

A)  the equilibrium value of money decreases.
B)  the equilibrium price level decreases.
C)  the supply of money has decreased.
D)  the demand for goods and services will decrease.E) None of the above
F) B) and C)

Question 7

When the money market is drawn with the value of money on the vertical axis,if the price level is above 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 8

The U.S.Treasury Department issues inflation-indexed bonds.What are inflation-indexed bonds and why are they important?

Accepted Answer

Inflation-indexed bonds are bonds whose ...

Question 9

If P represents the price of goods and services measured in money,then 1/P is the value of money measured in terms of goods and services.

Accepted Answer

A) True 
 B)False

Question 10

In order to maintain stable prices,a central bank must

Accepted Answer

A)  maintain low interest rates.
B)  keep unemployment low.
C)  tightly control the money supply.
D)  sell indexed bonds.E) C) and D)
F) A) and B)

Question 11

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply creates an excess

Accepted Answer

A)  supply of money causing people to spend more.
B)  supply of money causing people to spend less.
C)  demand for money causing people to spend more.
D)  demand for money causing people to spend less.E) All of the above
F) B) and D)

Question 12

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

Accepted Answer

A)  the price level will rise.
B)  the value of money will rise.
C)  money demand will shift left.
D)  money demand will shift right.E) All of the above
F) C) and D)

Question 13

Sally purchased one share of Stryker stock for $200 in year 1 and sold that share in year 2 for $400.The inflation rate between year 1 and year 2 was 50%.If the capital gains tax is 50%,what's Sally's after tax-real capital gain if the tax is on nominal gains? What is it if the tax is on real gains?

Accepted Answer

A)  $0, $50
B)  $50, $0
C)  $100, $50
D)  $100, $150E) None of the above
F) A) and B)

Question 14

Over the last 70 years the average annual U.S.inflation rate was about

Accepted Answer

A)  2 percent implying that prices have increased 10-fold.
B)  4 percent implying that prices have increased 10-fold.
C)  2 percent implying that prices have increased 16-fold.
D)  4 percent implying that prices increased about 16-fold.E) A) and C)
F) A) and B)

Question 15

Use the figure below for the following questions.
Figure 30-1
 
-Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,the graph shows that

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 increases.
D)  the equilibrium value of money increases.E) C) and D)
F) A) and B)

Question 16

If inflation is higher than expected,

Accepted Answer

A)  creditors receive a lower real interest rate than they had anticipated.
B)  creditors pay a lower real interest rate than they had anticipated.
C)  debtors receive a higher real interest rate than they had anticipated.
D)  debtors pay a higher real interest rate than they had anticipated.E) C) and D)
F) None of the above

Question 17

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Accepted Answer

A)  decrease that benefited creditors at the expense of debtors.
B)  decrease that benefited debtors at the expense of creditors.
C)  increase that benefited creditors at the expense of debtors.
D)  increase that benefited debtors at the expense of creditors.E) A) and B)
F) A) and C)

Question 18

Kelly purchased ten shares of Gentech stock for $200 in year 1 and sold all the shares in year 2 for $220 a share.Between year 1 and year 2,the price level increased by 5%.The tax on capital gains is 50%.If the capital gains tax is on nominal gains,how much tax does Sally pay on her gain?

Accepted Answer

A)  $90
B)  $95
C)  $100
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 19

If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

Accepted Answer

A) True 
 B)False

Question 20

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Accepted Answer

A)  the money supply must have increased, perhaps because the Fed bought bonds.
B)  the money supply must have increased, perhaps because the Fed sold bonds.
C)  the money supply must have decreased, perhaps because the Fed bought bonds.
D)  the money supply must have decreased, perhaps because the Fed sold bonds.E) A) and D)
F) C) and D)

Exam 30: Money Growth and Inflation

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,the graph shows that

Correct AnswerverifiedShow Answer

Kelly purchased ten shares of Gentech stock for $200 in year 1 and sold all the shares in year 2 for $220 a share.Between year 1 and year 2,the price level increased by 5%.The tax on capital gains is 50%.If the capital gains tax is on nominal gains,how much tax does Sally pay on her gain?

Correct AnswerverifiedShow Answer

Over the last 70 years the average annual U.S.inflation rate was about

Correct AnswerverifiedShow Answer

Using separate graphs,demonstrate what happens to the money supply,money demand,the value of money,and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

Correct Answerverified a. The Fed increases the money supp...View AnswerShow Answer

Nominal GDP measures

Correct AnswerverifiedShow Answer

In the fourteenth century,the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold,which was in use as a medium of exchange.We would predict that this increase in gold

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the money market is drawn with the value of money on the vertical axis,an increase in the money supply creates an excess

Correct AnswerverifiedShow Answer

If P represents the price of goods and services measured in money,then 1/P is the value of money measured in terms of goods and services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the Fed were to unexpectedly increase the money supply,creditors would gain at the expense of debtors.

Correct AnswerverifiedShow Answer

If inflation is higher than expected,

Correct AnswerverifiedShow Answer

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold.What happens to inflation,real interest rates,and nominal interest rates when the money supply growth rate increases from 5 percent to 10 percent?

Correct AnswerverifiedInflation and nominal interest...View AnswerShow Answer

Correct AnswerverifiedShow Answer

On income tax forms,people are required to report

Correct AnswerverifiedShow Answer

In 1898,prospectors on the Klondike River discovered gold.This discovery caused an unexpected price level

Correct AnswerverifiedShow Answer

The U.S.Treasury Department issues inflation-indexed bonds.What are inflation-indexed bonds and why are they important?

Correct AnswerverifiedInflation-indexed bonds are bonds whose ...View AnswerShow Answer

In order to maintain stable prices,a central bank must

Correct AnswerverifiedShow Answer

Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then

Correct AnswerverifiedShow Answer

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1.When the money supply curve shifts from MS₁ to MS₂,

Correct AnswerverifiedShow Answer

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a. The Fed increases the money supp...
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Inflation and nominal interest...
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Inflation-indexed bonds are bonds whose ...
View Answer

Correct Answer
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