Question 1

Given that petrol is key to the transport sector and all other sectors in Australia, why does the constant changing of price petrol not create menu costs?

Accepted Answer

There are very few costs assoc...

Question 2

If between when you purchase an asset and sell it, the general price level and the price of the asset both double, then you have realised a:

Accepted Answer

A)   capital gain
B)   real gain
C)   capital loss
D)   real lossE) None of the above
F) A) and C)

Question 3

The most important variable affecting the demand for money in the long run is the:

Accepted Answer

A)   nominal interest rate
B)   real interest rate
C)   price level
D)   velocity of moneyE) C) and D)
F) All of the above

Question 4

Why has Germany had much lower inflation than the US has over the past 50 years?

Accepted Answer

A)   German economists are more skilled than US economists
B)   The German economy does not rely on imported oil as much as the US economy does
C)   The German economy is still benefiting from its post-World War I period of hyperdeflation
D)   German policymakers have been extraordinarily averse to inflationE) B) and D)
F) B) and C)

Question 5

Unxpected inflation redistributes wealth from _____.

Accepted Answer

A)   creditors to debtors
B)   owners of real property to owners of financial assets
C)   debtors to creditors
D)   the government to fixed income recipientsE) A) and B)
F) C) and D)

Question 6

In order to maintain stable prices, the central bank must:

Accepted Answer

A)   be more accountable to the public
B)   maintain strict control over the money supply
C)   hire more economistsD) A) and B)
E) B) and C)

Question 7

What is the real interest rate under each of the following scenarios?
a. The nominal interest rate is 4 per cent and the inflation rate is 3 per cent
b. The nominal interest rate is 6 per cent and the inflation rate is -1 per cent
c. The nominal interest rate is 5 per cent and the inflation rate is 7 per cent

Accepted Answer

a. The real interest rate is 1...

Question 8

Money neutrality is the proposition that:

Accepted Answer

A)   changes in the money supply do not affect real variables
B)   changes in the money demand do not affect real variables
C)   changes in the money supply do not affect prices
D)   changes in the money demand do not affect pricesE) A) and B)
F) A) and C)

Question 9

Graph 30-1
 
-At point B in Graph 30-1: At point B in Graph 30-1:

Accepted Answer

A)   the value of money is less than its equilibrium level
B)   money supply is greater than money demand
C)   the price level is higher than its equilibrium level
D)   money demand is greater than money supplyE) A) and B)
F) A) and C)

Question 10

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services. Hence when the overall price level rises, the value of money falls.

Accepted Answer

A) True 
 B)False

Question 11

The Fisher effect is:

Accepted Answer

A)   the one-for-one adjustment of the nominal GDP to the inflation rate
B)   the one-for-one adjustment of the nominal interest rate to the nominal GDP
C)   the one-for-one adjustment of the nominal interest rate to the inflation rate
D)   the one-for-one adjustment of the nominal GDP to the rate of money growthE) C) and D)
F) All of the above

Question 12

The irrelevance of monetary changes for nominal variables is called monetary neutrality.

Accepted Answer

A) True 
 B)False

Question 13

Consider a simple economy that produces only chocolates. The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5. If the quantity of money supplied in the economy is $25, then the velocity of money is:

Accepted Answer

A)   2.5
B)   10
C)   20
D)   1000E) None of the above
F) A) and D)

Question 14

The classical dichotomy is:

Accepted Answer

A)   the separation of money and goods markets
B)   the theoretical separation of nominal and real variables
C)   the separation of the monetary system and production system
D)   the separation of goods and services produced today and goods and services produced tomorrowE) All of the above
F) A) and B)

Exam 30: Inflation: Its Causes and Costs

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services. Hence when the overall price level rises, the value of money falls.

Correct Answer
verified

The irrelevance of monetary changes for nominal variables is called monetary neutrality.

Correct Answer
verified

Why has Germany had much lower inflation than the US has over the past 50 years?

Correct Answer
verified

The classical dichotomy is:

Correct Answer
verified

Consider a simple economy that produces only chocolates. The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5. If the quantity of money supplied in the economy is $25, then the velocity of money is:

Correct Answer
verified

Graph 30-1 -At point B in Graph 30-1: At point B in Graph 30-1:

Correct Answer
verified

The most important variable affecting the demand for money in the long run is the:

Correct Answer
verified

Given that petrol is key to the transport sector and all other sectors in Australia, why does the constant changing of price petrol not create menu costs?

Correct Answer
verified
There are very few costs assoc...
View Answer

Unxpected inflation redistributes wealth from _____.

Correct Answer
verified

Money neutrality is the proposition that:

Correct Answer
verified

If between when you purchase an asset and sell it, the general price level and the price of the asset both double, then you have realised a:

Correct Answer
verified

Correct Answer
verified
a. The real interest rate is 1...
View Answer

The Fisher effect is:

Correct Answer
verified

In order to maintain stable prices, the central bank must:

Correct Answer
verified

Exam 30: Inflation: Its Causes and Costs

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services. Hence when the overall price level rises, the value of money falls.

Correct AnswerverifiedShow Answer

The irrelevance of monetary changes for nominal variables is called monetary neutrality.

Correct AnswerverifiedShow Answer

Why has Germany had much lower inflation than the US has over the past 50 years?

Correct AnswerverifiedShow Answer

The classical dichotomy is:

Correct AnswerverifiedShow Answer

Consider a simple economy that produces only chocolates. The economy produces 100 bars of chocolates in a year, and a chocolate bar costs $5. If the quantity of money supplied in the economy is $25, then the velocity of money is:

Correct AnswerverifiedShow Answer

Graph 30-1 -At point B in Graph 30-1: At point B in Graph 30-1:

Correct AnswerverifiedShow Answer

The most important variable affecting the demand for money in the long run is the:

Correct AnswerverifiedShow Answer

Given that petrol is key to the transport sector and all other sectors in Australia, why does the constant changing of price petrol not create menu costs?

Correct AnswerverifiedThere are very few costs assoc...View AnswerShow Answer

Unxpected inflation redistributes wealth from _____.

Correct AnswerverifiedShow Answer

Money neutrality is the proposition that:

Correct AnswerverifiedShow Answer

If between when you purchase an asset and sell it, the general price level and the price of the asset both double, then you have realised a:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The real interest rate is 1...View AnswerShow Answer

The Fisher effect is:

Correct AnswerverifiedShow Answer

In order to maintain stable prices, the central bank must:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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There are very few costs assoc...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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a. The real interest rate is 1...
View Answer

Correct Answer
verified

Correct Answer
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