1. A general increase in the price level is called: A. Hyperinflation.B. Deflation.C. InflationD. Devaluation.

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2. In the amount equation MV = PT, V is the: A. Revenue velocity that money.B. Transactions velocity of money.C. Inflation rate.D. Value of the money supply.
3. In the amount equation, the complete output the the economic situation Y is used instead of transactions T because:A. Income is harder come measure than transactions.B. Transactions room harder to measure 보다 income.C. Transactions flourish at a faster rate than income. D. Transactions grow at a slower rate than income.
4c - V to represent velocity, which is the price at i m sorry money circulates in the economy. See ar 5-1.
4. In the amount equation, V to represent the:A. Total variety of transactions during some duration of time. B. Price that a common transaction.C. Price at which each unit the money circulates in the economy. D. Amount of money.
5d - The quantity equation indicates % readjust in M + % change in V = % adjust in ns + % adjust in Y. The right hand side of the equation is % change in in the name of income. A 3- every cent boost in M and also a 2-per cent boost in V causes a 5-per cent increase in in the name of income. See ar 5-1.
5. According to the quantity equation, if M increases by 3 every cent and also V increases by 2 per cent, then:A. Real revenue increases by approximately 5 every cent.B. The price level rises by roughly 5 per cent.C. The nominal attention rate boosts by about 5 every cent. D. Nominal earnings increases by around 5 per cent.
6a - The amount equation claims that the money supply multiplied through velocity amounts to the price level multiplied by total output. If the money supply increases, the velocity and income are constant and calculation increases. See ar 5-1.
6. Utilizing the amount equation MV = PY, i beg your pardon of the following might happen if the money supply increases?A. Velocity is constant, price rise, and also total is constant.B. Velocity increases, prices space constant, and total calculation is constant.C. Velocity is constant, price fall, and also total output is constant. D. Velocity rises, price fall, and total output is constant.
7a - The every cent change kind of the amount equation implies that if the money it is provided is growing at 7 every cent and also velocity is constant, the sum of the development rate of real GDP and also the inflation price will same 7 every cent. See ar 5-1.
7. Think about an economy where the money it is provided is growing at 7 per cent per year and also velocity is constant. Which of the adhering to statements about real GDP growth and the inflation rate could be TRUE if the amount Theory of Money holds?A. Genuine GDP is farming at 2 per cent and inflation is 5 every cent.B. Genuine GDP is farming at 7 per cent and inflation is 7 per cent. C. Genuine GDP is cultivation at 2 per cent and inflation is 9 every cent. D. Genuine GDP is farming at 9 per cent and also inflation is 2 per cent.
8c - Velocity is computed together the euro worth of transactions split by the money supply. The euro value of transactions was €600; the money supply was €100; for this reason velocity to be 6. See section 5-1.
8. Consider an economic climate where the only items traded room coconuts and pineapples. Last year, 100 coconuts were offered at €1 apiece, and 200 pineapples were sold at €2.50 apiece. If the money supply to be €100, what to be velocity?A. 30B. 15 C. 6 D. 5
9. Which component of the amount equation is assumed consistent by the quantity theory of money?A. The money supplyB. The velocity the moneyC. The level of revenue D. The price level
10c - according to the amount theory, if the money supply doubles and output is constant, prices will certainly double. See ar 5-1.
10. The amount theory that money claims that if the money supply doubles and also output is constant, price will:A. Loss by half.B. Stay the same.C. Double.D. Autumn only if velocity rises.
11. The revenue increased by printing money is called: A. Interest rates.B. Velocity.C. Seigniorage.D. In the name of income.
12a - If M grows, then the federal government will collection seigniorage—this rules out selections (C) and (D). If Y increased while M and V to be constant, ns would need to fall, therefore ruling out choice (B). See section 5-2.
12. Suppose that the price level has actually risen yet the government has not collected any seigniorage. I beg your pardon of the following might have happened?A. V rose, M and Y to be constant.B. Y rose, M and also V were constant.C. M rose, Y and also V to be constant. D. M rose, Y fell, V was constant.
13a - as soon as the government raises revenue by print money, it increases the money supply. The increase in the money supply leader to inflation, i m sorry reduces the real value of people"s money holdings. See section 5-2.
13. When the government raises revenue by printing money, that imposes one "inflation tax" because the:A. Actual value of money holdings falls.B. Interest rate falls.C. Difference between nominal and real interest rates becomes smaller. D. Nominal worth of money holdings falls.
14a - The real interest rate (r) and also the in the name of interest price (i) are associated by the equation i = r + inflation. The difference in between the two interest prices is inflation. See ar 5-3.
14. The difference in between the nominal interest rate and also the genuine interest rate is: A. The inflation rate.B. Taxes.C. Seigniorage.D. Hyperinflation.
15b - The Fisher equation claims that the nominal interest price is the sum of the actual interest rate and inflation. Due to the fact that the genuine interest rate is figured out by savings and also investment, a 1-per cent rise in the inflation rate will reason a 1-per cent rise in the nominal interest rate. See section 5-3.
15. The Fisher result states the a 1 per cent climb in the rate of inflation causes a 1 every cent climb in the:A. Actual interest rate.B. Nominal interest rate.C. Money supply.D. Number of transactions.
16d - The ex ante actual interest price is same to the in the name of interest rate minus supposed inflation and also the ex article real attention rate equates to the in the name interest price minus actual inflation. They space equal if yes, really inflation equals expected inflation. See section 5-3.
16. The ex ante actual interest price differs indigenous the ex short article real interest rate just when: A. The money supply grows at a constant rate.B. The money supply continues to be the same.C. The money supply drops at a continuous rate.D. Really inflation differs from expected inflation.
17a - The in the name interest price is simply the sum of inflation and also the genuine interest rate. See ar 5-3.
17. I m sorry of the following statements is FALSE?A. If inflation is greater than the genuine interest rate, climate the nominal attention rate need to be negative.B. If inflation is higher than the nominal interest rate, climate the real interest rate should be negative.C. If the in the name interest rate is higher than the genuine interest rate, then inflation have to be positive.D. If the nominal interest price is higher than inflation, climate the actual interest rate must be positive
18d - since the genuine interest price is equal to the in the name interest rate minus the inflation rate, the was equal to 5 every cent in year 1 and −5 per cent in year 2. In between year 1 and year 2, it reduced by 10 percentage points. See ar 5-3.
18. Think about the following table:Year Inflation price Nominal Interest price 1. 5% 10%2. 10% 5%By just how much has actually the real interest rate readjusted between year 1 and year 2? A. It has actually increased through 5 percent points.B. The has diminished by 5 percent points.C. It has actually increased by 10 portion points.D. The has lessened by 10 percent points.
19b - The expected rate of inflation impacts the demand for actual money balances, the nominal interest rate, and the existing price level, yet it walk not affect the ex write-up real interest rate. See section 5-3.
19. Follow to the Fisher Effect, the expected rate of inflation go not influence the: A. Need for genuine money balances.B. Ex ante actual interest rate.C. Nominal attention rate.D. Existing price level.
20d - The expense of stop money is the difference in between the actual return on other assets and the genuine return ~ above money. The real return on alternate assets is the actual interest rate and the genuine return on money is the an unfavorable of the expected price of inflation. See ar 5-4.
20. The cost of stop money is determined by the: A. Inflation rate.B. Genuine interest rate.C. Growth rate the the money supply.D. Nominal interest rate.
21b - The need for genuine balances is a an adverse function of the nominal interest rate. If expected inflation increases, the nominal interest rate will increase and also the demand for actual balances will fall. See ar 5-4.
21. An increase in the expected rate of inflation will:A. Reduced the demand for actual balances since the real interest rate will rise.B. Lower need for real balances because the in the name interest rate will rise.C. Boost the need for genuine balances since the real interest rate will fall.D. Boost the need for real balances because the nominal interest rate will rise.
22c - The current nominal money supply is regulated by the central bank; the is not affected by the meant future money supply. See section 5-4.
22. The expected future money it is provided does not have an impact on: A. Supposed future inflation.B. The present price level.C. The current nominal money supply.D. The future price level.
23a - The in the name of interest price is the amount of the ex ante genuine interest rate and the expected inflation rate. Real money balances depend on the opportunity cost of hold money, i beg your pardon is the nominal interest rate. See section 5-4.
23. Select the pair of words that ideal completes this sentence: The nominal interest rate is the sum of the ex ante actual interest rate and the _________ inflation rate, and also real money balances room a role of the ___________ attention rate.A. Expected; nominalB. Actual; in the name C. Actual; realD. Expected; real
24. If an separation, personal, instance is to organize lower money balances ~ above average, she have to make an ext frequent trips come the financial institution to withdraw money. This inconvenience of to reduce money stop is called:A. A food selection cost.B. A shoeleather cost. C. One inflation tax. D. Seigniorage.
25b - an unexpected increase in inflation reduces the ex article real return paid by the borrower to the lender. Therefore, the redistributes wide range from lenders come borrowers. See ar 5- 5.
25. One result of an unexpected increase in inflation is that riches is redistributed from: A. Borrowers to lenders.B. Lenders come borrowers.C. Young people to old people.D. Government to firms.
26a - yes! The wealth shed by individuals as result of the inflation tax is collected by the government in the form of seigniorage and also is for this reason not a society loss. See section 5-5.
26. Which of the following is not a social cost of inflation?A. The money that human being hold loser value because of the inflation tax.B. People hold smaller actual balances and also so need to make much more frequent trips to the bank. C. Firms need to spend money to adjust prices an ext frequently.D. Inflation leads to higher variability in the relative prices charged by firms.
27c - that is sometimes the situation that a autumn in real wages is required to clear labor markets. Workers are reluctant come accept cuts to your nominal wage. Inflation permits real wages to fall while the nominal wage stays constant or even rises. See section 5-5.
27. One possible benefit from inflation is:A. Inflation reasons restaurants to update their menus an ext often. B. Inflation reduce distortions to relative prices.C. If in the name of wages room fixed, inflation decreases genuine wages.D. If nominal wages room fixed, inflation boosts real wages.
28c - governments that cannot raise money by counting or borrowing should print money come finance your spending. This rise in the money it is provided will cause inflation. Inflation, in turn, leader to a loss in actual tax revenue and the have to print even much more money. See ar 5-6.
28. Hyperinflation usually starts when:A. Civilization start safety too much money.B. This firm demand greater and greater prices for their goods.C. Federal governments are compelled to publish money come finance their spending.D. Fiscal deficits space small.

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29a - follow to the classical dichotomy, changes in the money supply affect only in the name of variables such as the price level. See ar 5-7.
29. Follow to the timeless dichotomy, which of this magnitudes is influenced by monetary policy?A. The price levelB. The actual wageC. The actual interest rateD. The price of expansion of real GDP
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