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| 1 | |
The quantity theory of money says that changes in ___________ lead to equivalent changes in __________, but have no effect on ___________. |
| | A) | prices, wages, output and employment |
| | B) | output, prices, employment |
| | C) | nominal money, the price level, output and employment |
| | D) | nominal money, output, prices |
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| 2 | |
If my salary increases by 10% and prices increase by 10% then my real wage has |
| | A) | fallen |
| | B) | increased |
| | C) | not changed |
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| 3 | |
The Fisher hypothesis is that 1 per cent ____ in inflation leads to a similar ____ in nominal interest rates so real interest rates change little in the long run. |
| | A) | rise, rise |
| | B) | rise, fall |
| | C) | fall, rise |
| | D) | rise, no change |
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| 4 | |
The flight from cash during hyperinflation is a vivid example of the Fisher hypothesis. |
| | A) | True |
| | B) | False |
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| 5 | |
Pure inflation means that prices of goods and inputs rise ___________. |
| | A) | move in opposite directions |
| | B) | lag one another by 3 months |
| | C) | rise |
| | D) | converge to the same rate |
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| 6 | |
The stock of real money demanded ____ with real income increases and ____ with increasing interest rates. |
| | A) | falls, falls |
| | B) | falls, increases |
| | C) | rises, rises |
| | D) | rises, falls |
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| 7 | |
If nominal wages and prices adjust slowly in the short run, ______ nominal money supply leads initially to a ______ real money stock. |
| | A) | Higher, higher |
| | B) | Lower, higher |
| | C) | Lower, lower |
| | D) | Higher, lower |
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| 8 | |
_______ inflation and ______ interest rates significantly reduce the demand for real cash. |
| | A) | falling, rising |
| | B) | rising, rising |
| | C) | rising, falling |
| | D) | falling, falling |
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| 9 | |
The natural rate of unemployment, and natural level of output, are their values in short-run equilibrium. |
| | A) | True |
| | B) | False |
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| 10 | |
Monetarists believe that a reduction in _____________can be achieved by reducing ________. |
| | A) | unemployment, prices |
| | B) | inflation, wages |
| | C) | unemployment, wages |
| | D) | inflation, nominal money |
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| 11 | |
If it is observed that there is a strong association between nominal money growth and nominal interest rates, then we have observed evidence in support of _____________. |
| | A) | the quantity theory of money |
| | B) | the Phillips hypothesis |
| | C) | the Fisher hypothesis |
| | D) | the classical model |
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| 12 | |
Faster nominal money growth leads to either higher inflation or higher nominal interest rates, but not both. |
| | A) | True |
| | B) | False |
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| 13 | |
During periods of rising inflation and rising interest rates we expect the demand for real cash to |
| | A) | rise |
| | B) | fall |
| | C) | not change |
| | D) | fluctuate |
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| 14 | |
Governments may contribute to inflationary pressure on account of building up large _________ |
| | A) | numbers of employees |
| | B) | welfare plans |
| | C) | budget deficits |
| | D) | expenditure |
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| 15 | |
The Phillips curve shows the trade-off between ____________ and ____________. |
| | A) | the inflation rate, interest rates |
| | B) | the inflation rate, the unemployment rate |
| | C) | interest rates, output |
| | D) | output, employment |
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| 16 | |
The natural rate of unemployment, the rate of unemployment in long run equilibrium is determined by the underlying rate of inflation. |
| | A) | True |
| | B) | False |
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| 17 | |
The long-run Phillips curve is __________ at the ________________. |
| | A) | horizontal, natural rate of inflation |
| | B) | horizontal, natural rate of unemployment |
| | C) | vertical, natural rate of inflation |
| | D) | vertical, natural rate of unemployment |
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| 18 | |
The short run Phillips curve can shift in response to changes in ____________. |
| | A) | Inflationary expectations |
| | B) | unemployment |
| | C) | the inflation rate |
| | D) | wage rises |
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| 19 | |
The costs of inflation are ___________. |
| | A) | shoe leather costs |
| | B) | menu costs |
| | C) | income redistribution |
| | D) | all of the above |
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| 20 | |
Only an incomes policy can deliver low inflation in the long run. |
| | A) | True |
| | B) | False |
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