Question 1

Deflation is:

Accepted Answer

A)  an overall rise in prices in the economy.
B)  an overall decline in prices in the economy.
C)  an overall rise in prices in the economy,excluding those with historically volatile price changes.
D)  an overall decline in prices in the economy,excluding those with historically volatile price changes.E) B) and C)
F) A) and B)

Question 2

If the Fed doubled the money supply in one day,the amount of goods and services traded would:

Accepted Answer

A)  not change.
B)  increase.
C)  decrease.
D)  collapse.E) B) and D)
F) A) and D)

Question 3

Why is deflation such a problem?

Accepted Answer

A)  It increases the value of debt,making it harder to pay it back.
B)  It decreases the value of debt,making it harder to pay it back.
C)  It increases the value of debt,making it easier to pay it back.
D)  It decreases the value of debt,making it easier to pay it back.E) B) and C)
F) A) and C)

Question 4

Shoe-leather costs refer to:

Accepted Answer

A)  the money,time,and opportunity used to change prices to keep pace with inflation.
B)  the time,money,and effort one has to spend managing cash in the face of inflation.
C)  being penalized via taxes for making more money in dollars,even though real purchasing power hasn't changed at all.
D)  None of these statements is true.E) A) and B)
F) All of the above

Question 5

If the Fed were to allow unemployment to remain at a higher level than NAIRU:

Accepted Answer

A)  they would maintain price stability.
B)  the dual mandate would be violated.
C)  they would fail to maintain full employment.
D)  All of these statements are true.E) B) and D)
F) A) and B)

Question 6

The net result of deflation is to:

Accepted Answer

A)  reduce the level of aggregate demand in the economy.
B)  increase the level of aggregate demand in the economy.
C)  be neutral and not affect the aggregate demand in the economy.
D)  None of these statements is true.E) B) and D)
F) B) and C)

Question 7

If the real interest rate is above zero,we know that the nominal interest rate must be:

Accepted Answer

A)  higher than the inflation rate.
B)  lower than the inflation rate.
C)  equal to the inflation rate.
D)  zero.E) A) and B)
F) B) and C)

Question 8

According to the quantity theory of money,changes in the price level are primarily the result of changes in the:

Accepted Answer

A)  quantity of money.
B)  unemployment rate.
C)  rate of spending.
D)  total output.E) A) and D)
F) All of the above

Question 9

If the real rate of return is 2 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Accepted Answer

A)  4 percent.
B)  2 percent.
C)  -2 percent.
D)  -4 percent.E) A) and C)
F) B) and C)

Question 10

An overall rise in prices in the economy is called:

Accepted Answer

A)  inflation.
B)  deflation.
C)  core inflation.
D)  core deflation.E) All of the above
F) A) and B)

Question 11

Which measure of inflation best reflects changing prices for the average consumer?

Accepted Answer

A)  Headline inflation
B)  Core inflation
C)  Overall inflation
D)  Nominal inflationE) A) and B)
F) None of the above

Question 12

Temporary changes in the price level caused by changes in the business cycle are called:

Accepted Answer

A)  demand pull inflation.
B)  cost push inflation.
C)  demand push inflation.
D)  cost pull inflation.E) A) and B)
F) A) and C)

Question 13

The "Cross of Gold" speech was:

Accepted Answer

A)  in favor of the gold standard and was given in 1896.
B)  against the gold standard and was given in 1896.
C)  in favor of the gold standard and was given in 2008.
D)  against the gold standard and was given in 2008.E) None of the above
F) B) and D)

Question 14

If an economy produces 3,000 units of output with a price level of $2 and with a velocity of money of 12,we know that the money supply must be:

Accepted Answer

A)  $1000.
B)  $500.
C)  $2,000.
D)  $4,000.E) A) and B)
F) A) and C)

Question 15

If the real rate of return is 5 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Accepted Answer

A)  7 percent.
B)  3 percent.
C)  -3 percent.
D)  -7 percent.E) C) and D)
F) All of the above

Question 16

If an economy produces 5,000 units of output with a price level of $1 and with a velocity of money of 4,we know that the money supply must be:

Accepted Answer

A)  $4,000.
B)  $1,250.
C)  $2,500.
D)  $5,000.E) B) and C)
F) C) and D)

Question 17

Borrowers:

Accepted Answer

A)  gain from inflation,as the value of their debt decreases.
B)  lose with inflation,as the value of their debt decreases.
C)  gain from inflation,as the value of their debt increases.
D)  lose with inflation,as the value of their debt increases.E) None of the above
F) A) and C)

Question 18

Brian is paid monthly and typically takes $500 of his pay in cash to spend throughout the month,and the rest he leaves in an interest-bearing checking account.With the recent inflation,Brian finds it necessary to go to the bank every week,withdrawing $125 each time,so that his money can earn interest for as long as it can before Brian needs to withdraw it.The added hassle of going to the bank more often in response to inflation is called:

Accepted Answer

A)  a shoe-leather cost.
B)  a menu cost.
C)  a transactions cost.
D)  a tax distortion.E) A) and D)
F) All of the above

Question 19

When L.L.Bean decides to increase its prices due to general inflation,they must reprint the millions of catalogs they produce and distribute.The costs associated with doing so in response to inflation are called:

Accepted Answer

A)  menu costs.
B)  shoe-leather costs.
C)  tax distortions.
D)  printing costs.E) C) and D)
F) A) and B)

Question 20

Inflation is:

Accepted Answer

A)  an overall rise in prices in the economy.
B)  an overall decline in prices in the economy.
C)  an overall rise in prices in the economy,excluding those with historically volatile price changes.
D)  an overall decline in prices in the economy,excluding those with historically volatile price changes.E) B) and C)
F) A) and D)

Exam 32: Inflation

If the Fed doubled the money supply in one day,the amount of goods and services traded would:

Correct Answer
verified

If the real rate of return is 5 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Correct Answer
verified

If an economy produces 3,000 units of output with a price level of $2 and with a velocity of money of 12,we know that the money supply must be:

Correct Answer
verified

When L.L.Bean decides to increase its prices due to general inflation,they must reprint the millions of catalogs they produce and distribute.The costs associated with doing so in response to inflation are called:

Correct Answer
verified

The "Cross of Gold" speech was:

Correct Answer
verified

Inflation is:

Correct Answer
verified

An overall rise in prices in the economy is called:

Correct Answer
verified

If an economy produces 5,000 units of output with a price level of $1 and with a velocity of money of 4,we know that the money supply must be:

Correct Answer
verified

According to the quantity theory of money,changes in the price level are primarily the result of changes in the:

Correct Answer
verified

Why is deflation such a problem?

Correct Answer
verified

Shoe-leather costs refer to:

Correct Answer
verified

If the real rate of return is 2 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Correct Answer
verified

Correct Answer
verified

Deflation is:

Correct Answer
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The net result of deflation is to:

Correct Answer
verified

If the real interest rate is above zero,we know that the nominal interest rate must be:

Correct Answer
verified

Which measure of inflation best reflects changing prices for the average consumer?

Correct Answer
verified

Temporary changes in the price level caused by changes in the business cycle are called:

Correct Answer
verified

If the Fed were to allow unemployment to remain at a higher level than NAIRU:

Correct Answer
verified

Borrowers:

Correct Answer
verified

Exam 32: Inflation

If the Fed doubled the money supply in one day,the amount of goods and services traded would:

Correct AnswerverifiedShow Answer

If the real rate of return is 5 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Correct AnswerverifiedShow Answer

If an economy produces 3,000 units of output with a price level of $2 and with a velocity of money of 12,we know that the money supply must be:

Correct AnswerverifiedShow Answer

When L.L.Bean decides to increase its prices due to general inflation,they must reprint the millions of catalogs they produce and distribute.The costs associated with doing so in response to inflation are called:

Correct AnswerverifiedShow Answer

The "Cross of Gold" speech was:

Correct AnswerverifiedShow Answer

Inflation is:

Correct AnswerverifiedShow Answer

An overall rise in prices in the economy is called:

Correct AnswerverifiedShow Answer

If an economy produces 5,000 units of output with a price level of $1 and with a velocity of money of 4,we know that the money supply must be:

Correct AnswerverifiedShow Answer

According to the quantity theory of money,changes in the price level are primarily the result of changes in the:

Correct AnswerverifiedShow Answer

Why is deflation such a problem?

Correct AnswerverifiedShow Answer

Shoe-leather costs refer to:

Correct AnswerverifiedShow Answer

If the real rate of return is 2 percent,and the inflation rate is 2 percent,then the nominal interest rate must be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Deflation is:

Correct AnswerverifiedShow Answer

The net result of deflation is to:

Correct AnswerverifiedShow Answer

If the real interest rate is above zero,we know that the nominal interest rate must be:

Correct AnswerverifiedShow Answer

Which measure of inflation best reflects changing prices for the average consumer?

Correct AnswerverifiedShow Answer

Temporary changes in the price level caused by changes in the business cycle are called:

Correct AnswerverifiedShow Answer

If the Fed were to allow unemployment to remain at a higher level than NAIRU:

Correct AnswerverifiedShow Answer

Borrowers:

Correct AnswerverifiedShow Answer

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