quiz 9

laura puts her money into a bank account that earns interest. one year later she sees that the account has 6 percent more dollars and that her money will buy 4 percent more goods a. the nominal interest rate was 10% and inflation rate was 6% b. nominal interest rate was 6% and inflation rate was 2% c. nominal interest rate was 6% and inflation rate was 4% d. nominal interest rate was 10% and inflation rate was 2%

b. the nominal interest rate was 6% and inflation rate was 2%

according to the fisher effect, if the inflation rate increases by 1% a. the real interest rate will increase by 1% and the nominal interest rate will increase by 1% b. the real interest rate will not change but the nominal interest rate will increase by 1% c. the real interest rate will increase by 1% but the nominal interest rate will not change d. neither the real interest rate nor the nominal interest rate will change

b. the real interest rate will not change but the nominal interest rate will increase by 1%

suppose the eocnomy's real GDP is 45 billion (measured in base year dollars) and money supply is 15 billion for the year. the value of one dollar is 0.33. how many times per year is the average dollar bill used to pay a newly produced good or service? a. 4.5 b. 6 c. 9 d. 12

c. 9

as the price level increases, the value of money a. increases, so people can hold less money to purchase goods and services b. increases, so people must hold more money to purchase goods and services c. decreases, so people must hold more money to purchase goods and services d. decreases, so people can hold less money to purchase goods and services

c. decreases, so people must hold more money to purchase goods and services

suppose the money supply grows at an average annual rate of 6%, velocity is constant, the nominal interest rate average 5%, and output grows at an average of 3%. according to the quantity theory, a. inflation averages 6% per year and real interest rate ia 1% b. inflation averages 6% per year and real interest rate is 2% c. inflation averages 3% per year and the real interest rate is 1% d. inflation averages 3% per year and the real interest rate is 2%

d. inflation averages 3% per year and the real interest rate is 2%

the money supply in country a is $100 billion. nominal GDP is $800 billion and real GDP is $200 billion. what are the price level and velocity of money in country A? a. the price level and velocity are both 8 b. the price level is 2 and velocity is 8 c. the price level and velocity is both 4 d. the price level is 4 and velocity is 8

d. the price level and velocity are both 4

suppose that real GDP in 2017 was $800 million (measured in base year dollars), money supply during this period was $2,000 million and the price level was 5 in a small country. in 2018, the Fed increased the money supply by 5%, to $2100 million. suppose that the velocity of money is constant over time. if real GDP increased to $816 million in 2018, a. the nominal GDP in 2018 would be $4000 million b.the inflation rate from 2017 to 2018 would be 5% c. the price level in 2018 would be 5.15 d. none of the above

c. the price level in 2018 would be 5.15

the money supply is $4000 million, nominal GDP is 8000 million, and real GDP is 2000 million in a small country. which of the following is 2? a. the price level and velocity b. the price level but not velocity c. velocity but not the price level d. neither the price level nor velocity

c. velocity but not the price level

Based on past experience, if a country is experiencing hyperinflation, then which of the following would be a reasonable guess? a. the country has high money supply growth b. inflation is acting like a tax on everyone who holds money. c. the government is printing money to finance its expenditures d. all of the above

d. all of the above

given a nominal interest rate of 6% in which of the following cases would you earn the lowest after tax real interest rate? a. inflation is 4%; tax rate is 5% b. inflation is 3%; tax rate is 20% c. inflation is 2%; tax rate is 30% d. after tax real interest rate is the same for all of the above

a. inflation is 4%; tax rate is 5%