Question 1

Which of the following best describes the effect of printing money to finance government expenditures on the economy?

Accepted Answer

A)  Printing money causes the value of money to rise.
B)  Printing money imposes a tax on everyone who holds money.
C)  Printing money is the principle method by which the Canadian government finances its expenditures.
D)  Printing money causes the nominal interest rate to decrease.E) None of the above
F) A) and D)

Question 2

You put money in an account that earns 6 percent. The inflation rate is 4 percent, and your marginal tax rate is 10 percent. Which of the following is your after-tax real rate of interest?

Accepted Answer

A)  3.4 percent
B)  1.6 percent
C)  1.4 percent
D)  1 percentE) B) and C)
F) A) and C)

Question 3

Use the figure below for the following questions.
Figure 30-1 1 and the value of money is 2, what is the excess demand or supply? A) There is no excess supply or excess demand. B) There is an excess demand. C) There is an excess supply. D) There is both an excess demand and an excess supply." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 30-1. If the current money supply is located at MS1 and the value of money is 2, what is the excess demand or supply?

Accepted Answer

A)  There is no excess supply or excess demand.
B)  There is an excess demand.
C)  There is an excess supply.
D)  There is both an excess demand and an excess supply.E) A) and D)
F) None of the above

Question 4

According to the classical dichotomy, which of the following is influenced by monetary factors?

Accepted Answer

A)  the amount of goods and services that wages can buy
B)  the interest rate adjusted for inflation
C)  the current-dollar wage
D)  the constant-dollar GDPE) A) and D)
F) A) and C)

Question 5

In 2009, Canadian economic activity was reduced by approximately 2.5 percent. What would our money demand-money supply model predict would happen to prices if money supply and velocity would have remained constant? Did this happen in reality? (Hint: to answer this question, you will need to look for information about the inflation level in 2009.) If you have found that your prediction was not supported by data, why do you think this happened?

Accepted Answer

Since the money demand curve is shifted ...

Question 6

Explain how inflation affects savings.

Accepted Answer

Inflation discourages savings. Income ta...

Question 7

Which of the following best describes the impact of open-market purchases by the Bank of Canada?

Accepted Answer

A)  The money supply and the value of money increase.
B)  The money supply increases, which makes the value of money decrease.
C)  The money supply and the value of money decrease.
D)  The money supply decreases, which makes the value of money increase.E) A) and B)
F) All of the above

Question 8

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 money...

Question 9

In this problem we try to establish a link between the quantity equation, MS1U1P1dS1S1P0V = PY, and the money demand-money supply diagram (MS1U1P1dS1S1P0 is the quantity of money demanded).
-Show in your graph how this curve changes when Y changes.

Accepted Answer

When Y increases from Y₁ to Y₂, the slope ...

Question 10

Which of the following does real GDP measure?

Accepted Answer

A)  the total quantity of final goods and services produced
B)  the dollar value of the economy's output of final goods and services
C)  the total income received from producing final goods and services at current prices
D)  the change in prices from the base year to current yearE) C) and D)
F) B) and D)

Question 11

Velocity in the country of Nemedia is always stable. In 2009, the money supply was $100 billion and real GDP was $300 billion. In 2010, the money supply increased by 10 percent, real GDP increased by 5 percent, and nominal GDP equalled $660 billion. By how much did the price level increase between 2009 and 2010?

Accepted Answer

A)  10 percent
B)  9.5 percent
C)  4.76 percent
D)  2.38 percentE) C) and D)
F) A) and B)

Question 12

When prices are falling, which of the following terms do economists use?

Accepted Answer

A)  disinflation
B)  deflation
C)  a contraction
D)  an inverted inflationE) B) and D)
F) B) and C)

Question 13

Which of the following events in took place in the early 1920s in Germany?

Accepted Answer

A)  deflation that proved detrimental to farmers
B)  an aversion to inflation by policymakers that kept wages stagnant
C)  an unexpected drop in inflation that hurt borrowers
D)  an extraordinarily high rate of inflationE) All of the above
F) A) and B)

Question 14

Monica buys a bond for $750 and then sells it later for $950. Monica's gain is which of the following?

Accepted Answer

A)  a net gain
B)  a Fisher gain
C)  a capital gain
D)  an inflation tax gainE) A) and B)
F) All of the above

Question 15

Assuming that velocity is stable, if real GDP grows by 10 percent this year, and if the money supply does not change this year, how does the price level change?

Accepted Answer

A)  The inflation rate will be zero.
B)  The price level will fall by 9.09 percent.
C)  The price level will rise by 10 percent.
D)  The price level will rise by 9.09 percent.E) A) and C)
F) None of the above

Question 16

The quantity theory implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Accepted Answer

A) True 
 B)False

Question 17

As the price level decreases, which of the following happens to the value of money?

Accepted Answer

A)  It increases, so people want to hold more of it.
B)  It increases, so people want to hold less of it.
C)  It decreases, so people want to hold more of it.
D)  It decreases, so people want to hold less of it.E) All of the above
F) A) and C)

Question 18

Which of the following 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) B) and D)
F) C) and D)

Question 19

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Accepted Answer

A)  production costs
B)  losses in real income
C)  losses in tax revenue
D)  menu costsE) A) and D)
F) None of the above

Question 20

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Accepted Answer

Relative prices are the value of one goo...

Exam 11: Money Growth and Inflation

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 money...
View Answer

Which of the following best describes the effect of printing money to finance government expenditures on the economy?

Correct Answer
verified

Which of the following are people required to report on income tax forms?

Correct Answer
verified

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Correct Answer
verified
Relative prices are the value of one goo...
View Answer

Which of the following events in took place in the early 1920s in Germany?

Correct Answer
verified

In this problem we try to establish a link between the quantity equation, M^dV = PY, and the money demand-money supply diagram (M^d is the quantity of money demanded). -Show in your graph how this curve changes when Y changes.

Correct Answer
verified
When Y increases from Y₁ to Y₂, the slope ...
View Answer

As the price level decreases, which of the following happens to the value of money?

Correct Answer
verified

Which of the following does real GDP measure?

Correct Answer
verified

You put money in an account that earns 6 percent. The inflation rate is 4 percent, and your marginal tax rate is 10 percent. Which of the following is your after-tax real rate of interest?

Correct Answer
verified

Monica buys a bond for $750 and then sells it later for $950. Monica's gain is which of the following?

Correct Answer
verified

Explain how inflation affects savings.

Correct Answer
verified
Inflation discourages savings. Income ta...
View Answer

Correct Answer
verified
Since the money demand curve is shifted ...
View Answer

Assuming that velocity is stable, if real GDP grows by 10 percent this year, and if the money supply does not change this year, how does the price level change?

Correct Answer
verified

According to the classical dichotomy, which of the following is influenced by monetary factors?

Correct Answer
verified

The quantity theory implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct Answer
verified

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the current money supply is located at MS₁ and the value of money is 2, what is the excess demand or supply?

Correct Answer
verified

Correct Answer
verified

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Correct Answer
verified

Which of the following best describes the impact of open-market purchases by the Bank of Canada?

Correct Answer
verified

When prices are falling, which of the following terms do economists use?

Correct Answer
verified

Exam 11: Money Growth and Inflation

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 money...View AnswerShow Answer

Which of the following best describes the effect of printing money to finance government expenditures on the economy?

Correct AnswerverifiedShow Answer

Which of the following are people required to report on income tax forms?

Correct AnswerverifiedShow Answer

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Correct AnswerverifiedRelative prices are the value of one goo...View AnswerShow Answer

Which of the following events in took place in the early 1920s in Germany?

Correct AnswerverifiedShow Answer

In this problem we try to establish a link between the quantity equation, MdV = PY, and the money demand-money supply diagram (Md is the quantity of money demanded). -Show in your graph how this curve changes when Y changes.

Correct AnswerverifiedWhen Y increases from Y1 to Y2, the slope ...View AnswerShow Answer

As the price level decreases, which of the following happens to the value of money?

Correct AnswerverifiedShow Answer

Which of the following does real GDP measure?

Correct AnswerverifiedShow Answer

You put money in an account that earns 6 percent. The inflation rate is 4 percent, and your marginal tax rate is 10 percent. Which of the following is your after-tax real rate of interest?

Correct AnswerverifiedShow Answer

Monica buys a bond for $750 and then sells it later for $950. Monica's gain is which of the following?

Correct AnswerverifiedShow Answer

Explain how inflation affects savings.

Correct AnswerverifiedInflation discourages savings. Income ta...View AnswerShow Answer

Correct AnswerverifiedSince the money demand curve is shifted ...View AnswerShow Answer

Assuming that velocity is stable, if real GDP grows by 10 percent this year, and if the money supply does not change this year, how does the price level change?

Correct AnswerverifiedShow Answer

According to the classical dichotomy, which of the following is influenced by monetary factors?

Correct AnswerverifiedShow Answer

The quantity theory implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Correct AnswerverifiedShow Answer

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the current money supply is located at MS1 and the value of money is 2, what is the excess demand or supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following inflation costs matter even if actual inflation and expected inflation are the same?

Correct AnswerverifiedShow Answer

Which of the following best describes the impact of open-market purchases by the Bank of Canada?

Correct AnswerverifiedShow Answer

When prices are falling, which of the following terms do economists use?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Relative prices are the value of one goo...
View Answer

Correct Answer
verified

In this problem we try to establish a link between the quantity equation, M^dV = PY, and the money demand-money supply diagram (M^d is the quantity of money demanded). -Show in your graph how this curve changes when Y changes.

Correct Answer
verified
When Y increases from Y₁ to Y₂, the slope ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Inflation discourages savings. Income ta...
View Answer

Correct Answer
verified
Since the money demand curve is shifted ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Use the figure below for the following questions. Figure 30-1 -Refer to Figure 30-1. If the current money supply is located at MS₁ and the value of money is 2, what is the excess demand or supply?

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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