Micro Chap 17 Part 1

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Over the past 80 years, prices in the U.S. have risen on average about
a. 2 percent per year.
b. 4 percent per year.
c. 3.6 percent per year.
d. 6 percent per year.

C 3.6 percent per year.

Over the past 80 years, the overall price level in the U.S. has experienced a(n)
a. 4-fold increase.
b. 10-fold increase.
c. 13-fold increase.
d. 17-fold increase.

D 17-fold increase.

Over the last 80 years, the average annual U.S. inflation rate was about
a. 3.6 percent, implying that prices have increased 16-fold.
b. 4 percent, implying that prices have increased 17-fold.
c. 4 percent, implying that prices have increased 16-fold.
d. 3.6 percent, implying that prices increased about 17-fold.

D 3.6 percent, implying that prices increased about 17-fold.

Inflation can be measured by the
a. change in the consumer price index.
b. percentage change in the consumer price index.
c. percentage change in the price of a specific commodity.
d. change in the price of a specific commodity.

b. percentage change in the consumer price index.

Inflation can be measured by the
a. change in the consumer price index. Inflation in the U.S. has averaged about 2.5% over the last 80 years.
b. change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.
c. percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.
d. percentage change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years

c. percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.

Which of the following is not correct?
a. The inflation rate is measured as the percentage change in a price index.
b. For the last 40 or so years, U.S. inflation hasn’t shown much variation from its average rate of about 2 percent.
c. During the 19th century there were long periods of falling prices in the U.S.
d. Some economists argue that the costs of moderate inflation are not nearly as large as the general public believes.

b. For the last 40 or so years, U.S. inflation hasn’t shown much variation from its average rate of about 2 percent.

In which of the following cases was the inflation rate 12 percent over the last year?
a. One year ago the price index had a value of 110 and now it has a value of 120.
b. One year ago the price index had a value of 120 and now it has a value of 132.
c. One year ago the price index had a value of 134 and now it has a value of 150.
d. One year ago the price index had a value of 145 and now it has a value of 163.

c. One year ago the price index had a value of 134 and now it has a value of 150.

8. If the price level increased from 120 to 130, then what was the inflation rate?
a. 1.1 percent.
b. 7.7 percent.
c. 10.0 percent.
d. 8.3 percent.

d. 8.3 percent.

9. If the price level increased from 120 to 144, then what was the inflation rate?
a. 24 percent.
b. 25 percent.
c. 20 percent.
d. 17 percent.

c. 20 percent.

10. If the price level increased from 200 to 250, then what was the inflation rate?
a. 50 percent
b. 25 percent
c. 20 percent
d. None of the above is correct.

b. 25 percent

11. If the price level last year was 180 and this year it is 176, then
a. there was inflation of 2.3 percent.
b. there was inflation of 4.0 percent.
c. there was deflation of 2.2 percent.
d. there was deflation of 4.0 percent.

c. there was deflation of 2.2 percent.

12. When prices are falling, economists say that there is
a. disinflation.
b. deflation.
c. a contraction.
d. an inverted inflation.

b. deflation.

13. Deflation
a. increases incomes and enhances the ability of debtors to pay off their debts.
b. increases incomes and reduces the ability of debtors to pay off their debts.
c. decreases incomes and enhances the ability of debtors to pay off their debts.
d. decreases incomes and reduces the ability of debtors to pay off their debts.

d. decreases incomes and reduces the ability of debtors to pay off their debts.

14. Between 1880 and 1896 the average level of prices in the U.S. economy
a. fell 23 percent.
b. fell 4 percent.
c. rose 23 percent.
d. rose 50 percent.

a. fell 23 percent.

15. In the last part of the 1800’s
a. deflation made it harder for farmers to pay off their debt.
b. deflation made it easier for farmers to pay off their debt.
c. inflation made it harder for farmers to pay off their debt.
d. inflation made it easier for farmers to pay off their debt.

a. deflation made it harder for farmers to pay off their debt.

16. The term hyperinflation refers to
a. the spread of inflation from one country to others.
b. a decrease in the inflation rate.
c. a period of very high inflation.
d. inflation accompanied by a recession.

c. a period of very high inflation.

17. Which of the following statements about U.S. inflation is not correct?
a. Low inflation was viewed as a triumph of President Carter’s economic policy.
b. There were long periods in the nineteenth century during which prices fell.
c. The U.S. public has viewed inflation rates of even 7 percent as a major economic problem.
d. The U.S. inflation rate has varied over time, but international data show even more variation.

a. Low inflation was viewed as a triumph of President Carter’s economic policy.

18. Which of the following statements concerning the history of U.S. inflation is not correct?
a. Prices rose at an average annual rate of about 3.6 percent over the last 80 years.
b. There was about a 17-fold increase in the price level over the last 80 years.
c. Inflation in the 1970s was below the average over the last 80 years.
d. The United States has experienced periods of deflation.

c. Inflation in the 1970s was below the average over the last 80 years.

19. Which of the following is correct?
a. A period of hyperinflation is a period of extraordinarily low inflation.
b. A period of deflation is any period during which the inflation rate is decreasing.
c. From 2002 to 2012, U.S. inflation averaged about 2.5 percent per year.
d. All of the above are correct.

c. From 2002 to 2012, U.S. inflation averaged about 2.5 percent per year.

20. There was hyperinflation during the
a. period 1880-1896 in the United States.
b. 1970s in the United States.
c. early part of the current century in Zimbabwe.
d. All of the above are correct.

c. early part of the current century in Zimbabwe.

21. Which country is correctly matched with its 2009 inflation rate?
a. 9 percent inflation in the United States.
b. 3.6 percent inflation in Russia.
c. 59 percent inflation in Venezuela.
d. 9.3 percent inflation in India

d. 9.3 percent inflation in India

22. In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached
a. 60 percent.
b. 80 percent.
c. 220 percent.
d. 24,000 percent.

d. 24,000 percent.

23. Economists agree that
a. neither high inflation nor moderate inflation is very costly.
b. both high and moderate inflation are quite costly.
c. high inflation is costly, but they disagree about the costs of moderate inflation.
d. moderate inflation is as costly as high inflation.

c. high inflation is costly, but they disagree about the costs of moderate inflation.

1. The classical theory of inflation
a. is also known as the quantity theory of money.
b. was developed by some of the earliest economic thinkers.
c. is used by most modern economists to explain the long-run determinants of the inflation rate.
d. All of the above are correct.

d. All of the above are correct.

2. The quantity theory of money
a. is a fairly recent addition to economic theory.
b. can explain both moderate inflation and hyperinflation.
c. argues that inflation is caused by too little money in the economy.
d. All of the above are correct.

b. can explain both moderate inflation and hyperinflation.

3. To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the
a. quantity theory of money.
b. price-index theory of money.
c. theory of hyperinflation.
d. disequilibrium theory of money and inflation.

a. quantity theory of money.

4. When the price level falls, the number of dollars needed to buy a representative basket of goods
a. increases, so the value of money rises.
b. increases, so the value of money falls.
c. decreases, so the value of money rises.
d. decreases, so the value of money falls.

c. decreases, so the value of money rises.

5. When the price level rises, the number of dollars needed to buy a representative basket of goods
a. increases, and so the value of money rises.
b. increases, and so the value of money falls.
c. decreases, and so the value of money rises.
d. decreases, and so the value of money falls

b. increases, and so the value of money falls.

6. If the CPI rises, the number of dollars needed to buy a representative basket of goods
a. increases, and so the value of money rises.
b. increases, and so the value of money falls.
c. decreases, and so the value of money rises.
d. decreases, and so the value of money falls

b. increases, and so the value of money falls.

7. When there is inflation, the number of dollars needed to buy a representative basket of goods
a. increases, and so the value of money rises.
b. increases, and so the value of money falls.
c. decreases, and so the value of money rises.
d. decreases, and so the value of money falls

b. increases, and so the value of money falls.

8. The value of money falls as the price level
a. rises, because the number of dollars needed to buy a representative basket of goods rises.
b. rises, because the number of dollars needed to buy a representative basket of goods falls.
c. falls, because the number of dollars needed to buy a representative basket of goods rises.
d. falls, because the number of dollars needed to buy a representative basket of goods falls.

a. rises, because the number of dollars needed to buy a representative basket of goods rises.

9. The value of money rises as the price level
a. rises, because the number of dollars needed to buy a representative basket of goods rises.
b. rises, because the number of dollars needed to buy a representative basket of goods falls.
c. falls, because the number of dollars needed to buy a representative basket of goods rises.
d. falls, because the number of dollars needed to buy a representative basket of goods falls.

d. falls, because the number of dollars needed to buy a representative basket of goods falls.

10. If the number of dollars needed to buy a representative basket of goods falls, the price level
a. falls, so the value of money falls.
b. falls, so the value of money rises.
c. rises, so the value of money falls.
d. rises, so the value of money rises.

b. falls, so the value of money rises.

11. When inflation rises people will
a. demand more money so the price level rises.
b. demand more money so the price level falls.
c. demand less money so the price level rises.
d. demand less money so the price level falls.

c. demand less money so the price level rises.

12. Suppose an economy produces only ice cream cones. If the price level rises, the value of currency
a. rises, because one unit of currency buys more ice cream cones.
b. rises, because one unit of currency buys fewer ice cream cones.
c. falls, because one unit of currency buys more ice cream cones.
d. falls, because one unit of currency buys fewer ice cream cones.

d. falls, because one unit of currency buys fewer ice cream cones.

13. If P denotes the price of goods and services measured in terms of money, then
a. 1/P represents the value of money measured in terms of goods and services.
b. P can be regarded as the "overall price level."
c. an increase in the value of money is associated with a decrease in P.
d. All of the above are correct.

d. All of the above are correct.

14. If P denotes the price of goods and services measured in terms of money, then
a. 1/P represents the value of money measured in terms of goods and services.
b. P can be interpreted as the inflation rate.
c. the supply of money influences the value of P, but the demand for money does not.
d. All of the above are correct.

a. 1/P represents the value of money measured in terms of goods and services.

15. The supply of money is determined by
a. the price level.
b. the Treasury and Congressional Budget Office.
c. the Federal Reserve System.
d. the demand for money.

c. the Federal Reserve System.

16. When we assume that the supply of money is a variable that the central bank controls, we
a. must then assume as well that the demand for money is not influenced by the value of money.
b. must then assume as well that the price level is unrelated to the value of money.
c. are ignoring the fact that, in the real world, households are also suppliers of money.
d. are ignoring the complications introduced by the role of the banking system.

d. are ignoring the complications introduced by the role of the banking system.

17. With the value of money on the vertical axis, the money supply curve is
a. upward-sloping.
b. downward-sloping.
c. horizontal.
d. vertical.

d. vertical.

18. With the value of money on the vertical axis, the money supply curve is
a. upward sloping because people supply a larger quantity of money when the value of money increases.
b. downward sloping because people supply a larger quantity of money when the value of money decreases.
c. horizontal because we assume the central bank controls the money supply
d. vertical because we assume the central bank controls the money supply.

d. vertical because we assume the central bank controls the money supply.

19. The supply of money increases when
a. the price level falls.
b. the interest rate increases.
c. the Fed makes open-market purchases.
d. money demand increases.

c. the Fed makes open-market purchases.

20. In the long run, money demand and money supply determine
a. the value of money and the real interest rate.
b. the value of money but not the real interest rate.
c. the real interest rate but not the value of money.
d. neither the value of money nor the real interest rate.

b. the value of money but not the real interest rate.

21. In the long run, money demand and money supply determine
a. the price level and the real interest rate.
b. the price level but not the real interest rate.
c. the real interest rate but not the price level.
d. neither the price level nor the real interest rate.

b. the price level but not the real interest rate.

22. Money demand refers to
a. the total quantity of financial assets that people want to hold.
b. how much income people want to earn per year.
c. how much wealth people want to hold in liquid form.
d. how much currency the Federal Reserve decides to print.

c. how much wealth people want to hold in liquid form.

23. The primary reason people hold money is
a. to keep wealth in a less liquid form.
b. to use it as a medium of exchange.
c. to use it for investment.
d. to earn interest.

b. to use it as a medium of exchange.

24. Money demand depends on
a. the price level and the interest rate.
b. the price level but not the interest rate.
c. the interest rate but not the price level.
d. neither the price level nor the interest rate.

a. the price level and the interest rate.

25. As the price level decreases, the value of money
a. increases, so people must 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 must hold less money to purchase goods and services.

a. increases, so people must hold less money to purchase goods and services.

26. As the price level rises, the value of money
a. increases, so people must 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 must hold less money to purchase goods and services.

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

27. When the Consumer Price Index increases from 100 to 120
a. more money is needed to buy the same amount of goods, so the value of money falls.
b. more money is needed to buy the same amount of goods, so the value of money rises.
c. less money is needed to buy the same amount of goods, so the value of money falls.
d. less money is needed to buy the same amount of goods, so the value of money rises.

a. more money is needed to buy the same amount of goods, so the value of money falls.

28. When the Consumer Price Index falls from 110 to 100
a. there is inflation of 9.1% and the value of money decreases.
b. there is deflation of 9.1% and the value of money increases.
c. there is deflation of 10% and the value of money increases.
d. there is inflation of 10% and the value of money decreases.

b. there is deflation of 9.1% and the value of money increases.

29. As the Consumer Price Index increases, the value of money
a. falls, so people hold more money to buy the goods and services they want.
b. falls, so people hold less money to buy the goods and services they want.
c. rises, so people hold more money to buy the goods and services they want.
d. rises, so people hold less money to buy the goods and services they want.

a. falls, so people hold more money to buy the goods and services they want.

30. When the money market is drawn with the value of money on the vertical axis, as the price level increases the quantity of money
a. demanded increases.
b. demanded decreases.
c. supplied increases.
d. supplied decreases.

a. demanded increases.

31. When the money market is drawn with the value of money on the vertical axis, as the price level decreases the quantity of money
a. demanded increases.
b. demanded decreases.
c. supplied increases.
d. supplied decreases.

b. demanded decreases.

32. If the value of a dollar falls, then the quantity of money demanded
a. rises, meaning people want to hold more of their wealth in a liquid form.
b. rises, meaning people desire to work more so their income rises.
c. falls, meaning people want to hold less of their wealth in a liquid form.
d. falls, meaning people want to work less so their income falls.

a. rises, meaning people want to hold more of their wealth in a liquid form.

33. When the money market is drawn with the value of money on the vertical axis, as the price level increases which of the following increases?
a. the quantity of money demanded and the quantity of money supplied
b. the quantity of money demanded but not the quantity of money supplied
c. the quantity of money supplied but not the quantity of money demanded
d. neither the quantity of money supplied nor the quantity of money demanded

b. the quantity of money demanded but not the quantity of money supplied

34. When the money market is drawn with the value of money on the vertical axis, as the price level increases, the value of money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded decreases.
d. decreases, so the quantity of money demanded increases.

d. decreases, so the quantity of money demanded increases.

35. When the money market is drawn with the value of money on the vertical axis, as the price level decreases, the value of money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded decreases.
d. decreases, so the quantity of money demanded increases.

b. increases, so the quantity of money demanded decreases.

36. When the money market is drawn with the value of money on the vertical axis, the money demand curve slopes
a. upward, because at higher prices people want to hold more money.
b. downward, because at higher prices people want to hold more money.
c. downward, because at higher price people want to hold less money.
d. upward, because at higher prices people want to hold less money.

b. downward, because at higher prices people want to hold more money.

37. When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a
a. movement to the right along the money demand curve.
b. movement to the left along the money demand curve.
c. shift to the right of the money supply curve.
d. shift to the left of the money supply curve.

b. movement to the left along the money demand curve.

38. When the money market is drawn with the value of money on the vertical axis, an increase in the price level causes a
a. shift to the right of the money demand curve.
b. shift to the left of the money demand curve.
c. movement to the left along the money demand curve.
d. movement to the right along the money demand curve.

d. movement to the right along the money demand curve.

39. When the money market is drawn with the value of money on the vertical axis,
a. money demand slopes upward and money supply is horizontal.
b. money demand slopes downward and money supply is horizontal.
c. money demand slopes upward and money supply is vertical.
d. money demand slopes downward and money supply is vertical.

d. money demand slopes downward and money supply is vertical.

40. When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in
a. the value of money.
b. real interest rates.
c. nominal interest rates.
d. the money supply.

a. the value of money.

41. When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in
a. nominal interest rates.
b. real interest rates.
c. the price level.
d. the money supply.

c. the price level.

42. When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.

b. excess demand for money, so the price level will fall.

43. When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.

c. excess supply of money, so the price level will rise.

44. When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.

b. excess demand for money, so the price level will fall.

45. When the money market is drawn with the value of money on the vertical axis, if the value of money is above the equilibrium level,
a. the price level will rise.
b. the value of money will rise.
c. money demand will shift leftward.
d. money demand will shift rightward.

a. the price level will rise.

46. When the money market is drawn with the value of money on the vertical axis, if there is a shortage of money then
a. the value of money rises which will make people desire to hold more money.
b. the value of money rises which will make people desire to hold less money.
c. the value of money falls which will make people desire to hold more money.
d. the value of money falls which will make people desire to hold less money.

b. the value of money rises which will make people desire to hold less money.

47. Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an
a. excess demand for money that will result in an increase in spending.
b. excess demand for money that will result in a decrease in spending.
c. excess supply of money that will result in an increase in spending.
d. excess supply of money that will result in a decrease in spending.

c. excess supply of money that will result in an increase in spending.

48. When the money market is drawn with the value of money on the vertical axis, an increase in the money supply shifts the money supply curve to the
a. right, lowering the price level.
b. right, raising the price level.
c. left, raising the price level.
d. left, lowering the price level.

b. right, raising the price level.

49. When the money market is drawn with the value of money on the vertical axis, if the money supply rises
a. the price level and the value of money rise.
b. the price level rises and the value of money falls.
c. the price level falls and the value of money rises.
d. the price level and the value of money fall.

b. the price level rises and the value of money falls.

50. When the money market is drawn with the value of money on the vertical axis, an increase in the money supply
a. increases the price level and increases the value of money.
b. increases the price level and decreases the value of money.
c. decreases the price level and increases the value of money.
d. decreases the price level and decreases the value of money.

b. increases the price level and decreases the value of money.

51. When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money
a. and equilibrium quantity of money to increase.
b. and equilibrium quantity of money to decrease.
c. to increase, while the equilibrium quantity of money decreases.
d. to decrease, while the equilibrium quantity of money increases.

d. to decrease, while the equilibrium quantity of money increases.

52. When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess
a. supply of money, causing people to spend more.
b. supply of money, causing people to spend less.
c. demand for money, causing people to spend more.
d. demand for money, causing people to spend less.

a. supply of money, causing people to spend more.

53. A decrease in the money supply creates an excess
a. supply of money that is eliminated by rising prices.
b. supply of money that is eliminated by falling prices.
c. demand for money that is eliminated by rising prices.
d. demand for money that is eliminated by falling prices.

d. demand for money that is eliminated by falling prices.

54. The supply of money increases when
a. the value of money increases.
b. the interest rate increases.
c. the Federal Reserve purchases bonds.
d. velocity increases.

c. the Federal Reserve purchases bonds.

55. If the Fed increases the money supply, then 1/P
a. falls, so the value of money falls.
b. falls, so the value of money rises.
c. rises, so the value of money falls.
d. rises, so the value of money rises.

a. falls, so the value of money falls.

56. The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land
a. the supply of money decreases and the value of money rises.
b. the supply of money increases and the value of money falls.
c. the demand for money increases and the value of money rises.
d. the demand for money decreases and the value of money falls.

b. the supply of money increases and the value of money falls

57. In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold
a. raised both the price level and the value of gold in Cairo.
b. raised the price level, but decreased the value of gold in Cairo.
c. lowered the price level, but increased the value of gold in Cairo.
d. lowered both the price level and the value of gold in Cairo.

b. raised the price level, but decreased the value of gold in Cairo.

58. In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by
a. selling bonds on the open market, which would have raised the value of money.
b. purchasing bonds on the open market, which would have raised the value of money.
c. selling bonds on the open market, which would have raised the value of money.
d. purchasing bonds on the open market, which would have lowered the value of money

purchasing bonds on the open market, which would have lowered the value of money

59. Open-market purchases by the Fed make the money supply
a. increase, which makes the value of money increase.
b. increase, which makes the value of money decrease.
c. decrease, which makes the value of money decrease.
d. decrease, which makes the value of money increase.

b. increase, which makes the value of money decrease.

60. Open-market purchases by the Fed
a. make the price level and value of money fall.
b. make the price level rise, and make the value of money fall.
c. make the price level and make the value of money rise.
d. make the price level fall, and make the value of money rise.

b. make the price level rise, and make the value of money fall.

61. Which of the following is correct?
a. If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
b. If the Fed sells bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.
c. If the Fed purchases bonds, then the money supply curve shifts right. An increase in the price level shifts the money supply curve right.
d. If the Fed sells bonds, then the money supply curve shifts right. A decrease in the price level shifts the money supply curve right.

a. If the Fed purchases bonds in the open market, then the money supply curve shifts right. A change in the price level does not shift the money supply curve.

62. When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve
a. shifts right, causing the price level to rise.
b. shifts right, causing the price level to fall.
c. shifts left, causing the price level to rise.
d. shifts left, causing the price level to fall.

d. shifts left, causing the price level to fall.

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.

b. shifts rightward, 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.

b. the money supply and the price level decrease.

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. spend more so the value of a dollar rises.
b. spend more so the value of a dollar falls.
c. spend less so the value of a dollar rises.
d. spend less so the value of a dollar falls.

c. spend less so the value of a dollar rises.

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

c. the price level rises 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.

a. the money supply must have increased, perhaps because the Fed bought 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.

b. This could have been created by an increase 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.

a. bought bonds, which increased 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.

c. excess supply of money which causes the price level to rise

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.

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.

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.

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.

c. money demand shifts leftward or money supply shifts rightward

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.

c. money demand shifts right or money supply shifts lef

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.

d. money demand shifts left or money supply shifts right.

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