Macroeconomics [ch. 17]

20 Questions | Total Attempts: 533

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Macroeconomics Quizzes & Trivia

Questions and Answers
  • 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. 
    • 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