Question 1

What does the principle of monetary neutrality imply?

Accepted Answer

A)   An increase in the money supply will increase real GDP and the price level.
B)   An increase in the money supply will increase real GDP, but not the price level.
C)   An increase in the money supply will increase the price level, but not real GDP.
D)   An increase in the money supply will increase neither the price level nor real GDP.E) A) and C)
F) A) and B)

Question 2

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars) ?

Accepted Answer

A)   -$64,000
B)   -$36,000
C)   -$16,667
D)   -$3333E) A) and D)
F) A) and B)

Question 3

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

Accepted Answer

A) True 
 B)False

Question 4

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

Accepted Answer

A)   an increase in the price level
B)   a decrease in the price level
C)   a decrease in real GDP
D)   an increase in real GDPE) B) and D)
F) A) and D)

Question 5

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Accepted Answer

A)   if either money demand or money supply shifts right
B)   if either money demand or money supply shifts left
C)   if money demand shifts right or money supply shifts left
D)   if money demand shifts left or money supply shifts rightE) C) and D)
F) B) and D)

Question 6

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if:
a. the Bank of Canada increases the money supply.
b. people decide to demand less money at each value of money.

Accepted Answer

a. The Bank of Canada increases the mone...

Question 7

What does the Fisher effect imply?

Accepted Answer

A)   The nominal interest rate adjusts one for one with the inflation rate.
B)   The growth rate of the money supply determines the inflation rate.
C)   Real variables are heavily influenced by the monetary system.
D)   The real interest rate adjusts one for one with the inflation rate.E) All of the above
F) None of the above

Question 8

What terms refers to the cost of changing price tags and price listings?

Accepted Answer

A)   inflation-induced tax distortions
B)   resource misallocation costs
C)   shoe leather costs
D)   menu costsE) B) and C)
F) C) and D)

Question 9

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Accepted Answer

Inflation raised the general price level...

Question 10

What type of variable is the price level?

Accepted Answer

A)   calculable
B)   efficient
C)   real
D)   nominalE) None of the above
F) C) and D)

Question 11

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Accepted Answer

Figure 11-2 <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the Bank of Canada sel...

Question 12

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Accepted Answer

A)   a nominal and real gain
B)   a nominal and real loss
C)   a nominal loss and a real gain
D)   a nominal gain and a real lossE) C) and D)
F) B) and C)

Question 13

What are people required to report on income tax forms?

Accepted Answer

A)   nominal interest earnings
B)   real interest earnings
C)   real capital gains
D)   expected inflationE) None of the above
F) A) and B)

Question 14

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Accepted Answer

A)   The price level and the quantity of money demanded increases.
B)   The price level increases, but the quantity of money demanded decreases.
C)   The price level decreases, but the quantity of money demanded increases.
D)   The price level and the quantity of money demanded decreases.E) A) and C)
F) B) and C)

Question 15

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

Accepted Answer

A)   There is a shortage, so the price level will rise.
B)   There is a shortage, so the price level will fall.
C)   There is a surplus, so the price level will rise.
D)   There is a surplus, so the price level will fall.E) A) and B)
F) A) and C)

Exam 11: Money Growth and Inflation

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Correct Answer
verified

What are people required to report on income tax forms?

Correct Answer
verified

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

Correct Answer
verified

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Bank of Canada increases the money supply. b. people decide to demand less money at each value of money.

Correct Answer
verified
a. The Bank of Canada increases the mone...
View Answer

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Correct Answer
verified
Inflation raised the general price level...
View Answer

What type of variable is the price level?

Correct Answer
verified

What does the Fisher effect imply?

Correct Answer
verified

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Correct Answer
verified

What does the principle of monetary neutrality imply?

Correct Answer
verified

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Correct Answer
verified
Figure 11-2 When the Bank of Canada sel...
View Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Correct Answer
verified

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

Correct Answer
verified

What terms refers to the cost of changing price tags and price listings?

Correct Answer
verified

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars) ?

Correct Answer
verified

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

Correct Answer
verified

Exam 11: Money Growth and Inflation

Assume you buy some stock and its price rises less than the price level. What is the result of your purchase?

Correct AnswerverifiedShow Answer

What are people required to report on income tax forms?

Correct AnswerverifiedShow Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, what happens if the price level is above the equilibrium level?

Correct AnswerverifiedShow Answer

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Bank of Canada increases the money supply. b. people decide to demand less money at each value of money.

Correct Answerverifieda. The Bank of Canada increases the mone...View AnswerShow Answer

Prices are many times higher today than they were 30 years ago, yet people do not work a lot harder nor spend a lot less. How can this be?

Correct AnswerverifiedInflation raised the general price level...View AnswerShow Answer

What type of variable is the price level?

Correct AnswerverifiedShow Answer

What does the Fisher effect imply?

Correct AnswerverifiedShow Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply?

Correct AnswerverifiedShow Answer

What does the principle of monetary neutrality imply?

Correct AnswerverifiedShow Answer

Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money.

Correct AnswerverifiedFigure 11-2 When the Bank of Canada sel...View AnswerShow Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, in which situation does the value of money increase?

Correct AnswerverifiedShow Answer

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

Correct AnswerverifiedShow Answer

What terms refers to the cost of changing price tags and price listings?

Correct AnswerverifiedShow Answer

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2019, when the price index was 600, for $100,000. If Trent must pay 20 percent of any capital gain in taxes, what is his after-tax real capital gain (in 2019 dollars) ?

Correct AnswerverifiedShow Answer

When the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
a. The Bank of Canada increases the mone...
View Answer

Correct Answer
verified
Inflation raised the general price level...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Figure 11-2 When the Bank of Canada sel...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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