63. When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve buys bonds,
then the money supply curve
a.
shifts rightward, causing the value of money measured in terms of goods and services to rise.
b.
shifts rightward, causing the value of money measured in terms of goods and services to fall.
c.
shifts leftward, causing the value of money measured in terms of goods and services to rise.
d.
shifts leftward, causing the value of money measured in terms of goods and services to fall.
64. When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then
a.
the money supply and the price level increase.
b.
the money supply and the price level decrease.
c.
the money supply increases and the price level decreases.
d.
the money supply increases and the price level increases.
65. When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads
people to
a.
b.
c.
d.
66. When the money market is drawn with the value of money on the vertical axis, if money supply and money demand
both shift to the right
a.
the price level must have risen
b.
the price level must have fallen.
c.
the price level rises if money supply shifts farther than money demand.
d.
the price level falls if money supply shifts farther than money demand.
67. Consider the money market drawn with the value of money on the vertical axis. If money demand is unchanged and
the price level rises, then
a.
the money supply must have increased, perhaps because the Fed bought bonds.
b.
the money supply must have increased, perhaps because the Fed sold bonds.
c.
the money supply must have decreased, perhaps because the Fed bought bonds.
d.
the money supply must have decreased, perhaps because the Fed sold bonds.
68. Suppose there is a surplus in the money market.
a.
This could have been created by an increase in the money supply. The value of money will rise.
b.
This could have been created by an increase in the money supply. The value of money will fall.
c.
This could have been created by a decrease in the money supply. The value of money will rise.
d.
This could have been created by a decrease in the money supply. The value of money will fall.
69. The value of money falls. This might be because the Federal Reserve
a.
bought bonds, which increased the money supply.
b.
bought bonds, which decreased the money supply.
c.
sold bonds, which increased the money supply.
d.
sold bonds, which decreased the money supply.
70. When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then
initially there is an
a.
excess demand for money which causes the price level to rise.
b.
excess demand for money which causes the price level to fall.
c.
excess supply of money which causes the price level to rise.
d.
excess supply of money which causes the price level to fall.
71. The price level rises if either
a.
money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a
rise in the value of money.
b.
money demand shifts rightward or money supply shifts leftward; this rise in the price level is associated with a
fall in the value of money.
c.
money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a
rise in the value of money.
d.
money demand shifts leftward or money supply shifts rightward; this rise in the price level is associated with a
fall in the value of money.
72. When the money market is drawn with the value of money on the vertical axis, the price level increases if
a.
either money demand or money supply shifts right.
b.
either money demand or money supply shifts left.
c.
money demand shifts right or money supply shifts left.
d.
money demand shifts left or money supply shifts right.
73. When the money market is drawn with the value of money on the vertical axis, the price level increases if
a.
money demand shifts right and decreases if money supply shifts right.
b.
money demand shifts right and decreases if money supply shifts left.
c.
money demand shifts left and decreases if money supply shifts right.
d.
money demand shifts left and decreases if money supply shifts left.
74. The price level rises if either
a.
money demand or money supply shifts rightward.
b.
money demand shifts rightward or money supply shifts leftward.
c.
money demand shifts leftward or money supply shifts rightward.
d.
money demand or money supply shifts leftward.
75. When the money market is drawn with the value of money on the vertical axis, the price level decreases if
a.
either money demand or money supply shifts right.
b.
either money demand or money supply shifts left.
c.
money demand shifts right or money supply shifts left.
d.
money demand shifts left or money supply shifts right.
76. When the money market is drawn with the value of money on the vertical axis, the value of money decreases if
a.
either money demand or money supply shifts right.
b.
either money demand or money supply shifts left.
c.
money demand shifts right or money supply shifts left.
d.
money demand shifts left or money supply shifts right.
77. Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then there is an excess
a.
demand for money that is represented by the distance between points A and C.
b.
demand for money that is represented by the distance between points A and B.
c.
supply of money that is represented by the distance between points A and C.
d.
supply of money that is represented by the distance between points A and B.
78. Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then
a.
the quantity of money demanded is greater than the quantity supplied; the price level will rise.
b.
the quantity of money demanded is greater than the quantity supplied; the price level will fall.
c.
the quantity of money supplied is greater than the quantity demanded; the price level will rise.
d.
the quantity of money supplied is greater than the quantity demanded; the price level will fall.
79. Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
a.
the demand for goods and services decreases.
b.
the economy’s ability to produce goods and services increases.
c.
the equilibrium price level decreases.
d.
None of the above is correct.
80. Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
a.
the equilibrium value of money decreases.
b.
the equilibrium price level decreases.
c.
the supply of money has decreased.
d.
the demand for goods and services will decrease.
81. Refer to Figure 30-1. If the current money supply is MS1, then
a.
equilibrium exists when the value of money is 2.
b.
equilibrium exists when the equilibrium is at point D.
c.
equilibrium exists when the value of money is 1.
d.
there is excess demand if the value of money is 2.
Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are
measured along the axes.
82. Refer to Figure 30-2. What quantity is measured along the horizontal axis?
a.
the price level
b.
the real interest rate
c.
the value of money
d.
the quantity of money
83. Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then the equilibrium value of
money is
a.
0.5 and the equilibrium price level is 2.
b.
2 and the equilibrium price level is 0.5.
c.
0.5 and the equilibrium price level cannot be determined from the graph.
d.
2 and the equilibrium price level cannot be determined from the graph.
84. Refer to Figure 30-2. If the relevant money-demand curve is the one labeled MD1, then
a.
when the money market is in equilibrium, one dollar purchases one-half of a basket of goods and services.
b.
when the money market is in equilibrium, one unit of goods and services sells for 2 dollars.
c.
there is an excess demand for money if the value of money in terms of goods and services is 0.375.
d.
All of the above are correct.
85. Refer to Figure 30-2. Which of the following events could explain a shift of the money-demand curve from MD1 to
MD2?
a.
an increase in the value of money
b.
a decrease in the price level
c.
an open-market purchase of bonds by the Federal Reserve
d.
None of the above is correct.
86. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of
money is 4. If the money market is in equilibrium, then the economy’s real GDP amounts to
a.
2,500.
b.
7,500.
c.
10,000.
d.
40,000.
87. Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the
economy’s real GDP is 20,000 for the year. If the money market is in equilibrium, then how many times per year is the
typical dollar bill used to pay for a newly produced good or service?
a.
4
b.
2
c.
8
d.
10
88. Refer to Figure 30-2. At the end of 2009 the relevant money-demand curve was the one labeled MD2. At the end of
2010 the relevant money-demand curve was the one labeled MD1. Assuming the economy is always in equilibrium, what
was the economy’s approximate inflation rate for 2010?
a.
–43 percent
b.
–57 percent
c.
57 percent
d.
75 percent
Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are
measured along the axes.
89. Refer to Figure 30-3. What quantity is measured along the vertical axis?
a.
the price level
b.
the velocity of money
c.
the value of money
d.
the quantity of money
90. Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is
a.
0.5 and the equilibrium value of money is 2.
b.
2 and the equilibrium value of money is 0.5.
c.
0.5 and the equilibrium value of money cannot be determined from the graph.
d.
2 and the equilibrium value of money cannot be determined from the graph.
91. Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS2, then
a.
when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and
services.
b.
when the money market is in equilibrium, one unit of goods and services sells for 33 cents.
c.
there is an excess demand for money if the value of money in terms of goods and services is 0.5.
d.
All of the above are correct.
92. Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy’s
real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately
a.
3.0
b.
6.0
c.
9.0
d.
1.5
93. Refer to Figure 30-3. Which of the following events could explain a shift of the money-supply curve from MS1 to
MS2?
a.
an increase in the value of money
b.
a decrease in the price level
c.
an open-market purchase of bonds by the Federal Reserve
d.
the Federal Reserve sells bonds.
94. Refer to Figure 30-3. At the end of 2009 the relevant money-supply curve was the one labeled MS1. At the end of
2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what
was the economy’s approximate inflation rate for 2010?
a.
–33 percent
b.
17 percent
c.
50 percent
d.
67 percent
95. Economic variables whose values are measured in monetary units are called
a.
dichotomous variables.
b.
nominal variables.
c.
classical variables.
d.
real variables.
96. Economic variables whose values are measured in goods are called
a.
dichotomous variables.
b.
nominal variables.
c.
classical variables.
d.
real variables.
97. The price level is a
a.
relative variable.
b.
dichotomous variable
c.
real variable.
d.
nominal variable.
98. Nominal GDP measures
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 measured in constant dollars.
d.
the overall level of prices.
99. On a given morning, Franco sold 40 pairs of shoes for a total of $80 at his shoe store.
a.
The $80 is a real variable. The quantity of shoes is a nominal variable.
b.
The $80 is a nominal variable. The quantity of shoes is a real variable.
c.
Both the $80 and the quantity of shoes are nominal variables.
d.
Both the $80 and the quantity of shoes are real variables.
100. On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.
a.
The $750 is a nominal variable. The 300 cups of coffee is a real variable.
b.
The $750 is a real variable. The 300 cups of coffee is a nominal variable.
c.
Both the $750 and the 300 cups of coffee are nominal variables.
d.
Both the $750 and the 300 cups of coffee are real variables.
101. The price of a Honda Accord
a.
and the price of a Honda Accord divided by the price of a Honda Civic are both real variables.
b.
and the price of a Honda Accord divided by the price of Honda Civic are both nominal variables.
c.
is a real variable, and the price of a Honda Accord divided by a Honda Civic is a nominal variable.
d.
is a nominal variable and the price of a Honda Accord divided by the price of a Honda Civic is a real variable.
102. The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up
fewer goods to make your payments.
a.
The dollar amount you pay is a nominal value. The number of goods you give up is a real value.
b.
The dollar amount you pay is a real value. The number of goods you give up is a nominal value.
c.
Both the dollar amount you pay and the goods you give up are nominal values.
d.
Both the dollar amount you pay and the goods you give up are real values.
103. When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. You compute the price of jeans
relative to tee-shirts.
a.
The dollar price of jeans and the relative price of jeans are both nominal variables.
b.
The dollar price of jeans and the relative price of jeans are both real variables.
c.
The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable.
d.
The dollar price of jeans is a real variable; the relative price of jeans is a nominal variable.
104. An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can
buy more goods and services than she could buy last year.
a.
Her real and nominal salary have risen.
b.
Her real and nominal salary have fallen.
c.
Her real salary has risen and her nominal salary has fallen.
d.
Her real salary has fallen and her nominal salary has risen.
105. An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot
buy as many goods and services as he could buy last year.
a.
His real and nominal salary have risen.
b.
His real and nominal salary have fallen.
c.
His real salary has risen and his nominal salary has fallen.
d.
His real salary has fallen and his nominal salary has risen.
106. Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes
a.
your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your
real wage also increased.
b.
your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your
real wage decreased.
c.
your real wage increase. If your real wage rose by a greater percentage than the price level, then your nominal
wage also increased.
d.
your real wage decrease. If your real wage rose by a greater percentage than the price level, then your nominal
wage decreased.
107. In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was 80. In 2011 tuition was
$12,000 and the price index was 320. Which of the following is correct?
a.
Nominal and real tuition were both higher in 1975.
b.
Nominal and real tuition were both higher in 2011.
c.
Nominal tuition was higher in 1975, real tuition was higher in 2011.
d.
Nominal tuition was higher in 2011, real tuition was higher in 1975.
108. Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her
income to purchase 180 units of corn at $6 per unit.
a.
Jane’s nominal income and real income decreased this year.
b.
Jane’s nominal income decreased this year, but her real income increased.
c.
Jane’s nominal income and real income increased this year.
d.
Jane’s nominal income increased this year, but her real income decreased.
109. Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from
140 to 147. As a result,
a.
The number of dollars you receive increases and the purchasing power of the dollars you receive increases.
b.
The number of dollars you receive increases and the purchasing power of the dollars you receive decreases.
c.
The number of dollars you receive decreases and the purchasing power of the dollars you receive increases.
d.
The number of dollars you receive decreases and the purchasing power of the dollars you receive decreases.
110. Last year, you earned a nominal wage of $10 per hour and the price level was 120. This year your nominal wage is
$11 per hour, but you are unable to purchase the same amount of goods as last year. The price level this year must be
a.
135
b.
132
c.
125
d.
121
111. Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your
a.
nominal wage is higher.
b.
nominal wage is lower.
c.
real wage is higher.
d.
real wage is lower.
112. Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is
unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her
a.
nominal income and real income increased.
b.
nominal income increased, but their real income decreased.
c.
nominal income and real income decreased.
d.
nominal income decreased, but their real income increased.
113. You find that to attract a sufficient number of workers you have to pay them more dollars. Given the price of your
output you determine you are paying your workers more in goods than before. Which of the following has risen?
a.
The real and nominal value of the wages you pay.
b.
The real but not the nominal value of wages you pay.
c.
The nominal but not the real value of the wages you pay.
d.
Neither the real nor the nominal value of the wages you pay.
114. Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?
a.
$40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more
dollars.
b.
8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold
more dollars.
c.
$40. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer
dollars.
d.
8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold
fewer dollars.
115. Suppose every good costs $8 per unit and Molly holds $120. What is the real value of the money she holds?
a.
$120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more
dollars.
b.
$120. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer
dollars.
c.
15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to
hold more dollars.
d.
15 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to
hold fewer dollars.
116. Suppose ice cream cones costs $3. Molly holds $60. What is the real value of the money she holds?
a.
$60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold
more dollars.
b.
$60. If the price of ice cream cones rises, to maintain the real value of her money holdings she need to hold
fewer dollars.
c.
20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she
needs to hold more dollars.
d.
20 ice cream cones. If the price of ice cream cones rises, to maintain the real value of her money holdings she
needs to hold fewer dollars.
117. On its web site, your bank posts the interest rates it is paying on savings accounts. Those posted rates
a.
and a price index are both real variables.
b.
and a price index are both nominal variables.
c.
are real variables, and a price index is a nominal variable.
d.
are nominal variables, and a price index is a real variable