tut6

In which of the following cases was the inflation rate 10 percent over the last year?

• One year ago the price index had a value of 110 and now it has a value of 120.

• One year ago the price index had a value of 120 and now it has a value of 132.

• One year ago the price index had a value of 126 and now it has a value of 140.

• One year ago the price index had a value of 145 and now it has a value of 163.

When prices are falling, economists say that there is

• disinflation.

• deflation.

• a contraction.

• an inverted inflation.

With the value of money on the vertical axis, the money supply curve is

• upward-sloping.

• downward-sloping.

• horizontal.

• vertical.

The inflation tax refers to

• the revenue a government creates by printing money.

• higher inflation which requires more frequent price changes.

• the idea that, other things the same, an increase in the tax rate raises the inflation rate.

• taxes being indexed for inflation.

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

• demanded increases.

• demanded decreases.

• supplied increases.

• supplied decreases.

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.

If the Fed increases the money supply, then 1/P

• falls, so the value of money falls.

• falls, so the value of money rises.

• rises, so the value of money falls.

• rises, so the value of money rises.

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.

Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then

• the value of money is lower than its equilibrium level.

• the price level is higher than its equilibrium level.

• the quantity of money demanded is greater than the quantity of money supplied.

• the quantity of money demanded is less than the quantity of money supplied.

Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then

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

• when the money market is in equilibrium, one unit of goods and services sells for 2 dollars.

• there is an excess demand for money if the value of money in terms of goods and services is 0.375.

• All of the above are correct.