Chapter_30_TF.doc - Chapter 30 TF\/SA \u2014 Money Growth and Inflation TRUE\/FALSE 1 U.S prices rose at an average annual rate of about 4 percent over the

Chapter_30_TF.doc - Chapter 30 TF/SA u2014 Money Growth...

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Chapter 30 TF/SA — Money Growth and Inflation TRUE/FALSE 1.U.S. prices rose at an average annual rate of about 4 percent over the last 70 years. DIF: 1 REF: 30-1 TOP: U.S. inflation MSC: Analytical 2.The United States has never had deflation. DIF: 1 REF: 30-1 TOP: Deflation MSC: Definitional 3.In the 1990s, U.S. prices rose at about the same rate as in the 1970s. DIF: 1 REF: 30-1 TOP: U.S. inflation MSC: Definitional 4.The quantity theory of money can explain hyperinflations but not moderate inflation. DIF: 1 REF: 30-1 TOP: Hyperinflation MSC: Interpretive 5.If Prepresents the price of goods and services measured in money, then 1/Pis the value of money measured in terms of goods and services. DIF: 1 REF: 30-1 TOP: Value of money MSC: Interpretive 6.When the value of money is on the vertical axis, an increase in the price level shifts money demand to the right. DIF: 1 REF: 30-1 TOP: Money demand MSC: Applicative 7.The money supply curve shifts to the left when the Fed buys government bonds. DIF: 2 REF: 30-1 TOP: Money supply MSC: Analytical 8.When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money. DIF: 2 REF: 30-1 TOP: Money supply MSC: Definitional 9.If the Fed increases the money supply, the equilibrium value of money decreases and the equilibrium price level must increase. DIF: 1 REF: 30-1 TOP: Money market MSC: Analytical
10.A rising price level eliminates an excess supply of money. DIF: 2 REF: 30-1 TOP: Money market MSC: Analytical 11.Nominal GDP measures output of final goods and services in physical terms. DIF: 1 REF: 30-1 TOP: Nominal variables MSC: Interpretive 12.The classical dichotomy is useful for analyzing the economy because in the long run nominal variablesare heavily influenced by developments in the monetary system, and real variables are not. DIF: 1 REF: 30-1 TOP: Classical dichotomy MSC: Definitional 13.The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run. DIF: 2 REF: 30-1 TOP: Monetary neutrality MSC: Interpretive 14.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. DIF: 1 REF: 30-1 TOP: Quantity theory MSC: Applicative

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