Macroeconomics 7

Which of the following does not describe hyperinflation?

• Germany, Hungary, Bolivia, Ukraine, and Zimbabwe have experienced hyperinflation in the last 100 years.
• During a hyperinflation people often try to shift to a “hard” currency issued by another country.
• The purchasing power of money increases dramatically during hyperinflation.
• Hyperinflation is often defined as an annual inflation rate higher than 100 percent.
• All of these statements are accurate.

Which one of the following statements is FALSE?

• Bartering is a likely consequence of hyperinflation.
• An example of commodity money would be a gold coin.
• One of the roles of money is as a store of value.
• Money is a flow variable.
• One of the roles of money is as a unit of account.

Which one of the following is NOT likely to be a result of a high rate of inflation?

• People will increasingly rely upon barter.
• People will be more likely to postpone major purchases.
• Wealth will be redistributed from creditors to debtors.
• Menu costs will increase.
• People on fixed pensions will see the value of their pensions decrease.

Which one of the following is NOT likely to be a result of deflation?

• Uncertainty will increase.
• People will be more likely to postpone major purchases.
• Wealth will be redistributed from creditors to debtors.
• Menu costs will increase.
• People on fixed pensions will see the value of their pensions increase.

Which of these does NOT describe the Japanese economy of recent decades?

• The Japanese economy has struggled with generally falling prices.
• Japan experienced a banking crisis in 1989 that triggered a recession.
• Japanese consumers have held back on spending, exacerbating economic problems.
• The Japanese banking crisis of the late 1980s triggered serious inflation.
• All of these statements are accurate.

The term “money” is used in economics in a very specific way. Which of these is NOT a correct use of this term from an economics perspective?

• Money overcomes the “double coincidence of wants.”
• Someone with a well-paying job in the financial sector “makes a lot of money.”
• “I don’t trust banks, so my money is under my mattress.”
• “How can you tell me that I don’t have any money in my checking account when I still have checks left in my checkbook?
• These are all correct usages of the term “money.”

Which one of the following is the best example of commodity money?

• Goldd coins

• business stocks

• valuable painting

• Dollar bills

• Real estate

Which one of the following is the best example of fiat money?

• Gold coins
• Business stocks
• A valuable painting
• Dollar bills
• Real estate

What is the main reason that currency in the euro area has value?

• Because all currency is backed up with an equivalent value in gold.
• Because all currency is backed up with an equivalent value in silver.
• Because all currency is backed up with an equivalent value in government bonds.
• Because all currency is backed up with an equivalent value in government capital assets.
• Because the government declares currency to have value.

Which of the following is NOT a component of the M1 money supply in the euro area?

• Checking account deposits
• Currency in circulation
• Money market account deposits.
• Travelers checks
• All of these are components of the M1 money supply.