When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve

shifts left, causing the price level to fall.

shifts right, causing the price level to rise.

shifts right, causing the price level to fall.

shifts left, causing the price level to rise.

When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to

spend less so the value of a dollar rises.

spend more so the value of a dollar rises.

spend more so the value of a dollar falls.

spend less so the value of a dollar falls.

Suppose there is a surplus in the money market.

This could have been created by an increase in the money supply. The value of money will fall.

This could have been created by an increase in the money supply. The value of money will rise.

This could have been created by a decrease in the money supply. The value of money will rise.

This could have been created by a decrease in the money supply. The value of money will fall.

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

excess supply of money which causes the price level to rise.

excess demand for money which causes the price level to rise.

excess demand for money which causes the price level to fall.

excess supply of money which causes the price level to fall.

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

money demand shifts left or money supply shifts right.

either money demand or money supply shifts right.

either money demand or money supply shifts left.

money demand shifts right or money supply shifts left.

The price level rises if either

money demand shifts leftward or money supply shifts rightward.

money demand or money supply shifts rightward.

money demand shifts rightward or money supply shifts leftward.

money demand or money supply shifts leftward.

When the money market is drawn with the value of money on the vertical axis, the value of money decreases if

money demand shifts left or money supply shifts right.

either money demand or money supply shifts right.

either money demand or money supply shifts left.

money demand shifts right or money supply shifts left.

Refer to the Figure on the back. If the money supply is MS2 and the value of money is 2, then

the quantity of money supplied is greater than the quantity demanded; the price level will rise.

the quantity of money demanded is greater than the quantity supplied; the price level will rise.

the quantity of money demanded is greater than the quantity supplied; the price level will fall.

the quantity of money supplied is greater than the quantity demanded; the price level will fall.

Refer to the Figure on the back. When the money supply curve shifts from MS1 to MS2,

the equilibrium value of money decreases.

the equilibrium price level decreases.

the supply of money has decreased.

the demand for goods and services will decrease.

Refer to the Figure on the back. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

an increase in the value of money

an open-market purchase of bonds by the Federal Reserve

Refer to the Figure on the back. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. If the relevant money-supply curve is the one labeled MS2, then

when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.

when the money market is in equilibrium, one unit of goods and services sells for 33 cents.

there is an excess demand for money if the value of money in terms of goods and services is 0.5.

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

The dollar amount you pay is a nominal value. The number of goods you give up is a real value.

The dollar amount you pay is a real value. The number of goods you give up is a nominal value.

Both the dollar amount you pay and the goods you give up are nominal values.

Both the dollar amount you pay and the goods you give up are real values.

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage decreased.

your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal wage also increased.

your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal wage decreased.

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Jane’s nominal income increased this year, but her real income decreased.

Jane’s nominal income and real income decreased this year.

Jane’s nominal income decreased this year, but her real income increased.

Jane’s nominal income and real income increased this year.

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

both the classical dichotomy and the quantity theory of money.

the classical dichotomy, but not the quantity theory of money.

the quantity theory of money, but not the classical dichotomy.

neither the classical dichotomy nor the quantity theory of money.

If monetary neutrality holds, then an increase in the money supply

increases nominal but not real variables. Most economists think that monetary neutrality is a good description of the long run.

increases real but not nominal variables. Most economists think that monetary neutrality is a good description of the short run.

increases real but not nominal variables. Most economists think that monetary neutrality is a good description of the long run.

increases nominal but not real variables. Most economists think that monetary neutrality is a good description of the short run.

According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then

the price level would rise by 5 percent and real GDP would be unchanged.

both the price level and real GDP would rise by 5 percent.

the price level would be unchanged and real GDP would rise by 5 percent.

both the price level and real GDP would be unchanged.

Suppose the money supply grew at an average annual rate of 8%, velocity was constant, the nominal interest rate averaged 9%, and output grew at an average annual rate of 3%. According to the quantity theory,

inflation averaged 5% per year and the real interest rate was 4%.

inflation averaged 8% per year and the real interest rate was 9%.

inflation averaged 11% per year and the real interest rate was 17%.

inflation averaged 1% per year and the real interest rate was 6%.

If a country experienced deflation, then

the real interest rate would be greater than the nominal interest rate.

the nominal interest rate would be greater than the real interest rate.

the real interest rate would equal the nominal interest rate.

nominal GDP would be smaller than the money supply.

In the U.S., from the early 1980s through the early 1990s,

both inflation and nominal interest rates fell.

both inflation and nominal interest rates rose.

the inflation rate fell and the nominal interest rate rose.

the inflation rate rose and the nominal interest rate fell.

According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases

inflation and nominal interest rates, but does not change real interest rates.

inflation, nominal interest rates, and real interest rates.

inflation and real interest rates, but does not change nominal interest rates.

nominal interest rates and real interest rates, but does not change inflation.

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then

the price level is 2, and velocity is 4.

the price level is ½, and velocity is 2.

the price level is ½, and velocity is 4.

the price level is 2, and velocity is 2.

According to the quantity theory of money and the Fisher effect, if the central bank increases the rate of money growth, then

inflation and the nominal interest rate both increase.

inflation and the real interest rate both increase.

the nominal interest rate and the real interest rate both increase.

inflation, the real interest rate, and the nominal interest rate all increase.

Ongoing inflation does not automatically reduce most people's incomes because

wage inflation goes together with price inflation.

the tax code is fully indexed for inflation.

people respond to inflation by holding less money.

higher inflation lowers real interest rates.

If an economy always has inflation of 10 percent per year, which of the following costs of inflation will it NOT suffer?

arbitrary redistributions between debtors and creditors

shoeleather costs from reduced holdings of money

menu costs from more frequent price adjustment

distortions from the taxation of nominal capital gains

chap 30 (2)

Authored by Sumu Tuong

English

University

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40 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

excess demand for money that will result in an increase in spending.

excess demand for money that will result in a decrease in spending.

excess supply of money that will result in an increase in spending.

excess supply of money that will result in a decrease in spending.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When the money market is drawn with the value of money on the vertical axis, if the money supply rises

the price level and the value of money rise.

the price level rises and the value of money falls.

the price level falls and the value of money rises.

the price level and the value of money fall.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

and equilibrium quantity of money to increase.

and equilibrium quantity of money to decrease.

to increase, while the equilibrium quantity of money decreases.

to decrease, while the equilibrium quantity of money increases.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A decrease in the money supply creates an excess

supply of money that is eliminated by rising prices.

supply of money that is eliminated by falling prices.

demand for money that is eliminated by rising prices.

demand for money that is eliminated by falling prices.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land

the supply of money decreases and the value of money rises.

the supply of money increases and the value of money falls.

the demand for money increases and the value of money rises.

the demand for money decreases and the value of money falls.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by

selling bonds on the open market, which would have raised the value of money.

purchasing bonds on the open market, which would have raised the value of money.

selling bonds on the open market, which would have raised the value of money.

purchasing bonds on the open market, which would have lowered the value of money.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Open-market purchases by the Fed

make the price level and value of money fall.

make the price level rise, and make the value of money fall.

make the price level and make the value of money rise.

make the price level fall, and make the value of money rise.

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