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Ch.7-Money Growth and Inflation (+answers)
Kinh tế học vi mô (Trường Đại học Ngân hàng Thành phố Hồ Chí Minh)
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Chapter 30
Money Growth and Inflation
Sec00 - Money Growth and Inflation
MULTIPLE CHOICE
4.
Inflation can be measured by the
a. change in the consumer price index.
b. percentage change in the consumer price index.
c. percentage change in the price of a specific commodity.
d. change in the price of a specific commodity.
ANS: B
NAT: Analytic
MSC: Definitional
18.
DIF: 1
REF: 30-0
LOC: Unemployment and inflation
TOP:
Inflation
Economists agree that
a. neither high inflation nor moderate inflation is very costly.
b. both high and moderate inflation are quite costly.
c. high inflation is costly, but they disagree about the costs of moderate inflation.
d. moderate inflation is as costly as high inflation.
ANS: C
NAT: Analytic
MSC: Interpretive
DIF: 2
REF: 30-0
LOC: Unemployment and inflation
TOP:
Inflation costs
Sec01 - Money Growth and Inflation - The Classical Theory of Inflation
MULTIPLE CHOICE
2.
The value of money falls as the price level
a. rises, because the number of dollars needed to buy a representative basket of goods rises.
b. rises, because the number of dollars needed to buy a representative basket of goods falls.
c. falls, because the number of dollars needed to buy a representative basket of goods rises.
d. falls, because the number of dollars needed to buy a representative basket of goods falls.
ANS: A
NAT: Analytic
MSC: Interpretive
6.
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Inflation
With the value of money on the vertical axis, the money supply curve is
a. upward-sloping.
b. downward-sloping.
c. horizontal.
d. vertical.
ANS: D
DIF: 1
REF: 30-1
NAT: Analytic
LOC: The role of money
TOP: Money market | Money supply
MSC: Definitional
15.
If M = 3,000, P = 2, and Y = 12,000, what is velocity?
a. 1/2
b. 2
c. 4
d. 8
ANS: D
NAT: Analytic
MSC: Applicative
DIF: 2
REF:
LOC: The role of money
30-1
TOP:
Quantity equation
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24.
Which of the following combinations of real interest rates and inflation implies a nominal interest rate of 7
percent?
a. a real interest rate of 2.5 percent and an inflation rate of 2 percent
b. a real interest rate of 4 percent and an inflation rate of 11 percent
c. a real interest rate of 6 percent and an inflation rate of 1 percent
d. a real interest rate of 5.5 percent and an inflation rate of 3 percent
ANS: C
DIF: 1
REF: 30-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Real interest rate | Nominal interest rate
MSC:
25.
The classical theory of inflation
a. is also known as the quantity theory of money.
b. was developed by some of the earliest economic thinkers.
c. is used by most modern economists to explain the long-run determinants of the inflation rate.
d. All of the above are correct.
ANS: D
NAT: Analytic
MSC: Definitional
35.
TOP:
Classical dichotomy
DIF: 1
REF:
LOC: The role of money
TOP:
Money demand
30-1
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,
a. the price level will rise.
b. the value of money will rise.
c. money demand will shift leftward.
d. money demand will shift rightward.
ANS: B
NAT: Analytic
MSC: Analytical
44.
DIF: 1
REF: 30-1
LOC: Unemployment and inflation
Money demand refers to
a. the total quantity of financial assets that people want to hold.
b. how much income people want to earn per year.
c. how much wealth people want to hold in liquid form.
d. how much currency the Federal Reserve decides to print.
ANS: C
NAT: Analytic
MSC: Definitional
43.
Analytical
DIF: 2
REF:
LOC: The role of money
30-1
TOP:
Money market
Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money
supply increases, then at the old value of money there is an
a. excess demand for money that will result in an increase in spending.
b. excess demand for money that will result in a decrease in spending.
c. excess supply of money that will result in an increase in spending.
d. excess supply of money that will result in a decrease in spending.
ANS: C
NAT: Analytic
MSC: Analytical
DIF: 2
REF:
LOC: The role of money
30-1
TOP:
Money market
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46.
When the money market is drawn with the value of money on the vertical axis, an increase in the money
supply shifts the money supply curve to the
a. right, lowering the price level.
b. right, raising the price level.
c. left, raising the price level.
d. left, lowering the price level.
ANS: B
NAT: Analytic
MSC: Applicative
DIF: 2
REF:
LOC: The role of money
30-1
TOP:
Money market
Figure 30-1
65.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then
a. the value of money is lower than its equilibrium level.
b. the price level is higher than its equilibrium level.
c. the quantity of money demanded is greater than the quantity of money supplied.
d. the quantity of money supplied is greater than the quantity of money demanded.
ANS: D
NAT: Analytic
MSC: Analytical
84.
30-1
TOP:
Money market
TOP:
Nominal variables
Economic variables whose values are measured in goods are called
a. dichotomous variables.
b. nominal variables.
c. classical variables.
d. real variables.
ANS: D
NAT: Analytic
MSC: Definitional
93.
DIF: 2
REF:
LOC: The role of money
DIF: 1
REF:
LOC: The role of money
30-1
Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that
your
a. nominal wage is higher.
b. nominal wage is lower.
c. real wage is higher.
d. real wage is lower.
ANS: D
DIF: 1
REF: 30-1
NAT: Analytic
LOC: The role of money
TOP: Nominal variables | Real variables
MSC: Interpretive
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101. According to the classical dichotomy, which of the following increases when the money supply increases?
a. the real interest rate
b. real GDP
c. the real wage
d. None of the above increases.
ANS: D
NAT: Analytic
MSC: Definitional
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Classical dichotomy
102. According to the classical dichotomy, which of the following is influenced by monetary factors?
a. real GDP
b. unemployment
c. nominal interest rates
d. All of the above are correct.
ANS: C
NAT: Analytic
MSC: Definitional
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Classical dichotomy
107. 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 nominal wage nor the price level
ANS: A
NAT: Analytic
MSC: Definitional
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Classical dichotomy
122. According to the quantity equation, the price level would change less than proportionately with a rise in the
money supply if there were also
a. either a rise in output or a rise in velocity.
b. either a rise in output or a fall in velocity.
c. either a fall in output or a rise in velocity.
d. either a fall in output or a fall in velocity.
ANS: B
NAT: Analytic
MSC: Analytical
DIF: 3
REF:
LOC: The role of money
30-1
TOP:
Quantity equation
128. If Y and V are constant, and M doubles, the quantity equation implies that the price level
a. more than doubles.
b. changes but less than doubles.
c. doubles.
d. does not change
ANS: C
NAT: Analytic
MSC: Analytical
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Quantity equation
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140. Which of the following is not implied by the quantity equation?
a. If velocity is stable, an increase in the money supply creates a proportional increase in nominal
output.
b. If velocity is stable and money is neutral, an increase in the money supply creates a proportional
increase in the price level.
c. With constant money supply and output, an increase in velocity creates an increase in the price
level.
d. With constant money supply and velocity, an increase in output creates a proportional increase in
the price level.
ANS: D
NAT: Analytic
MSC: Analytical
DIF: 2
REF:
LOC: The role of money
30-1
TOP:
Quantity equation
146. Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a
reasonable guess?
a. The country has high money supply growth.
b. Inflation is acting like a tax on everyone who holds money.
c. The government is printing money to finance its expenditures.
d. All of the above are correct.
ANS: D
DIF: 1
REF: 30-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Hyperinflation | Inflation tax
MSC: Interpretive
148. Governments may prefer an inflation tax to some other type of tax because the inflation tax
a. is easier to impose.
b. reduces inflation.
c. falls mainly on high-income individuals.
d. reduces the real cost of government expenditure.
ANS: A
NAT: Analytic
MSC: Definitional
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Inflation tax
160. If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal
interest rate?
a. 4 percent
b. 6 percent
c. 8 percent
d. 10 percent
ANS: A
DIF: 2
REF: 30-1
NAT: Analytic
LOC: The role of money
TOP: Nominal interest rate | Real interest rate | Deflation
MSC: Applicative
170. Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then
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.
ANS: C
NAT: Analytic
MSC: Definitional
DIF: 1
REF:
LOC: The role of money
30-1
TOP:
Fisher effect
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Sec02 - Money Growth and Inflation - The Costs of Inflation
MULTIPLE CHOICE
5.
People can reduce the inflation tax by
a. reducing savings.
b. increasing deductions on their income tax.
c. reducing cash holdings.
d. None of the above is correct.
ANS: C
NAT: Analytic
MSC: Interpretive
6.
TOP:
Inflation tax
DIF: 1
REF: 30-1
LOC: Unemployment and inflation
TOP:
Shoeleather costs of inflation
If there is inflation, then a firm that has kept its price fixed for some time will have a
a. high relative price. Relative-price variability rises as the inflation rate rises.
b. high relative price. Relative-price variability falls as the inflation rate rises.
c. low relative price. Relative-price variability rises as the inflation rate rises.
d. low relative price. Relative-price variability falls as the inflation rate rises.
ANS: C
NAT: Analytic
MSC: Interpretive
47.
30-2
Shoeleather costs arise when higher inflation rates induce people to
a. spend more time looking for bargains.
b. spend less time looking for bargains.
c. hold more money.
d. hold less money.
ANS: D
NAT: Analytic
MSC: Definitional
14.
DIF: 1
REF:
LOC: The role of money
DIF: 2
REF: 30-2
LOC: Unemployment and inflation
TOP:
Inflation | Relative prices
Wealth is redistributed from debtors to creditors when inflation was expected to be
a. high and it turns out to be high.
b. low and it turns out to be low.
c. low and it turns out to be high.
d. high and it turns out to be low.
ANS: D
DIF: 1
REF: 30-2
NAT: Analytic
LOC: The role of money
TOP: Wealth redistribution | Inflation
MSC: Applicative
49.
Wealth is redistributed from creditors to debtors when inflation is
a. high, whether it is expected or not.
b. low, whether it is expected or not.
c. unexpectedly high.
d. unexpectedly low.
ANS: C
DIF: 1
REF: 30-2
NAT: Analytic
LOC: The role of money
TOP: Wealth redistribution | Inflation
MSC: Applicative
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51.
If the economy unexpectedly went from inflation to deflation,
a. both debtors and creditors would have reduced real wealth.
b. both debtors and creditors would have increased real wealth.
c. debtors would gain at the expense of creditors.
d. creditors would gain at the expense of debtors.
ANS: D
DIF: 2
REF: 30-2
NAT: Analytic
LOC: The role of money
TOP: Wealth redistribution | Inflation
MSC: Analytical
Sec03 - Money Growth and Inflation - Conclusion
MULTIPLE CHOICE
1.
In order to maintain stable prices, a central bank must
a. maintain low interest rates.
b. keep unemployment low.
c. tightly control the money supply.
d. sell indexed bonds.
ANS: C
NAT: Analytic
MSC: Interpretive
DIF: 1
REF:
LOC: The role of money
30-3
TOP:
Inflation
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