Macroeconomics [ch. 17]
![Macroeconomics [ch. 17] - Quiz](https://media.proprofs.com/images/QM/user_images/1826446/1669969822.jpg "Macroeconomics [ch. 17] - Quiz")
- 1.In the long run, inflation is caused by
- A.
Bands that have market power and refuse to lend money.
- B.
Governments that raise taxes so high that it increases the cost of doing business and, hence, raises prices.
- C.
Governments that print too much money
- D.
Increases in the price of inputs, such as labor and oil
- E.
None of the above
- 2.When prices rise at an extraordinarily high rate, it is called
- A.
Inflation
- B.
Hyperinflation
- C.
Deflation
- D.
Hypoinflation
- E.
Disinflation
- 3.If the price level doubles,
- A.
The quantity demanded of money falls by half
- B.
The money supply has been cut by half
- C.
Nominal income is unaffected
- D.
The value of money has been cut by half
- E.
None of the above
- 4.In the long run, the demand for money is most dependent upon
- A.
The level of prices
- B.
The availability of credit cards
- C.
The availability of banking outlets
- D.
The interest rate
- 5.The quantity theory of money concludes that an increase in the money supply causes
- A.
A proportional increase in velocity
- B.
A proportional increase in prices
- C.
A proportional increase in real output
- D.
A proportional decrease in velocity
- E.
A proportional decrease in prices
- 6.An example of a real variable is
- A.
The nominal interest rate
- B.
The ratio of the value of wages to the price of sode
- C.
The price of corn
- D.
The dollar wage
- E.
None of the above
- 7.The quantity equation states that
- A.
Money x price level = velocity x real output
- B.
Money x real output = velocity x price level
- C.
Money x velocity = price level x real output
- D.
None of the above
- 8.If money is neutral,
- A.
An increase in the money supply does nothing
- B.
The money supply cannot be changed because it is tied to a commodity such as gold
- C.
A change in the money supply only affects real variables such as real output
- D.
A change in the money supply only affects nominal variables such as prices and dollar wages
- E.
A change in the money supply reduces velocity proportionately; therefore, there is no effect on either prices or real output
- 9.If the money supply grows 5 percent, the real output grows 2 percent, prices should rise by
- A.
5 percent
- B.
Less than 5 percent
- C.
More than 5 percent
- D.
None of the above
- 10.Velocity is
- A.
The annual rate of turnover of the money supply
- B.
The annual rate of turnover by output
- C.
The annual rate of turnover of business inventories
- D.
Highly unstable
- E.
Impossible to measure
- 11.Countries that employ an inflation tax do so because
- A.
The government doesn't understand the causes and consequences of inflation
- B.
The government has a balanced budget
- C.
Government expenditures are high and the government has inadequate tax collections and difficulty borrowing
- D.
An inflation tax is the most equitable of all taxes
- E.
An inflation tax is the most progressive (paid by the rich) of all taxes
- 12.An inflation tax is
- A.
An explicit tax paid quarterly by businesses baed on the amount of increase in the prices of their products
- B.
A tax on people who hold money
- C.
A tax on people who hold interest-bearing savings accounts
- D.
Usually employed by governments with balanced budgets
- E.
None of the above
- 13.Suppose the nominal interest rate is 7 percent while the money supply is growing at a rate of 5 percent per year. Assuming real output remains fixed, if the government increases the growth rate of the money supply from 5 percent to 9 percent, the Fisher effect suggets that, in the long run, the nominal interest rate should become
- A.
4 percent
- B.
9 percent
- C.
11 percent
- D.
12 percent
- E.
16 percent
- 14.If the nominal interest rate is 6 percent and the inflation rate is 3 percent, the real interest rate is
- A.
3 percent
- B.
6 percent
- C.
9 percent
- D.
18 percent
- E.
None of the above
- 15.If actual inflation turns out to be greater than people had expected, then
- A.
Wealth was redistributed to lenders from borrowers
- B.
Wealth was redistributed to borrowers from lenders
- C.
No redistribution occurred
- D.
The real interest rate is unaffected
- 16.Which of the following costs of inflation does not occur when inflation is constant and predictable?
- A.
Shoeleather costs
- B.
Menu costs
- C.
Costs due to inflation-induced tax distortions
- D.
Arbitrary redistributions of wealth
- E.
Costs due to confusion and inconvenience
- 17.Suppose that, because of inflation, a business in Russia must calculate, print, and mail a new price list to its customers each month. This is an example of
- A.
Shoeleather costs
- B.
Menu costs
- C.
Costs due to inflation-induced tax distortions
- D.
Arbitrary redistributions of wealth
- E.
Costs due to confusion and inconvenience
- 18.Suppose that, because of inflation, people in Brazil economize on currency to go to the bank each day to withdraw their daily currency needs. This is an example of
- A.
Shoeleather costs
- B.
Menu costs
- C.
Costs due to infaltion-induced tax distortions
- D.
Costs due to inflation-induced relative price variability, which misallocates resources
- E.
Costs due to confusion and inconvenience
- 19.If the real interest rate is 4 percent, the inflation rate is 6 percent, and the tax rate is 20 percent, what is the after-tax real interest rate?
- A.
1 percent
- B.
2 percent
- C.
3 percent
- D.
4 percent
- E.
5 percent
- 20.Which of the following statements about inflation is not true?
- A.
Unanticipated inflation redistributes wealth
- B.
An increase in inflation increases nominal interest rates
- C.
If there is inflation, taxing nominal interest income reducees the return to saving and reduces the rate of economic growth
- D.
Inflation reduces people's real purchasing power because it raises the cost of the things people buy
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