GEORGE MASON UNIVERSITY MACROECONOMICS
104 AND MONEY THEORY EXAM 2 STUDY GUIDE
QUESTIONS WITH VERIFIED AND CORRECT
ANSWERS LATEST REVIEW
Multiple Choice (3pts each)
1. Which of the following is included in the gross national product (GNP or GDP) statistics?
a. The value of leisure
b. The value of consumer goods and services stage transactions
c. The value of non-market, non-cash intermediated transactions
d. The level of environmental quality
e. The underground economic transactions
2. Which of the following would a classical macroeconomist agree with?
a. The interest rate is the price of money
b. Nominals effect real variables
c. Recessions are caused by an over production of all economic goods
d. Prices should be regulated for the people’s interests
e. Effective demand comes from prior supply
3. Which of the following is true concerning comparative advantage?
a. It can only occur when there is an absolute productivity advantage
b. It can only occur when there is “full employment”
c. It can only occur once it is discovered
d. It can never occur when there is specialisation and division of labor
e. It can never occur unless there is no “opportunity cost”
4. Suppose Mr. Jones buys $100,000 worth of IBM stock on the New York Stock Exchange.
Which of the following is true?
a. This shows up in the GDP statistics, but not the GNP statistics
b. This shows up in the GNP statistics, but not the GDP statistics
c. This shows up in the Income Version of the Quantity Theory
d. This shows up in the Fisher transactions version of the Quantity Theory
e. This shows up in both the GNP statistics and the Income version of the Quantity
Theory
5. Which of the following explains the dynamic effects of the inflation tax?
a. People in Group 3 receive the inflation tax on their cash balances
b. The inflation tax is important for government to help "balance its fiscal budget”
, c. The inflation tax is used by major corporations to take advantage and “gouge” the
consumer
d. The inflation tax forces the price level to adjust to a new monetary equilibrium
e. The expected costs and returns for holding money are important for estimating
the supply of real cash balances (Cambridge version of the Quantity Theory)
6. Suppose the government institutes an effective maximum price control on rental
apartments. Which of the following would happen?
a. A decrease in supply and an increase in demand
b. A surplus or excess supply
c. An increase in new construction of apartment housing
d. An increase in supply and a decrease of demand
e. A shortage of apartment housing
7. Which of the following is not true?
a. Frictional unemployment in the labor market arises from a lack of information in
the labor economy
b. Cyclical unemployment exists when the macro economy is in recession
c. It is logically possible for both the unemployment and the employment rates to
both simultaneously increase or decrease together
d. Structural unemployment occurs because there is a skills mismatch for jobs in
the economy
8. Which is true with respect to various versions of the quantity theory?
a. In the Fisher version, money is primarily an asset whereas in the Cambridge
version, it is primarily a medium of exchange
b. The Cambridge version is a tautological identity while the Fisher version allows
us to make a distinction between actual and desired cash holdings
c. In the Fisher version, the left side of the equation is the goods and services
transfer side and the right side is the money transfer side
d. The Income version excludes the value of all intermediate transactions in the
aggregate income circuit
e. Increasing the quantity of money (ceteris paribus) leads to the increase in its
value in all three versions
9. Using the income version of the quantity theory of money, calculate the annual inflation
rate if the following events occur: money supply increases by 4%, velocity of circulation
increases by 3%, and real quantity of output increases by 1%. The inflation rate will be:
a. 5% Inflation
b. 8% Inflation
c. 2% Inflation
d. 6% Inflation
e. 2% Deflation
104 AND MONEY THEORY EXAM 2 STUDY GUIDE
QUESTIONS WITH VERIFIED AND CORRECT
ANSWERS LATEST REVIEW
Multiple Choice (3pts each)
1. Which of the following is included in the gross national product (GNP or GDP) statistics?
a. The value of leisure
b. The value of consumer goods and services stage transactions
c. The value of non-market, non-cash intermediated transactions
d. The level of environmental quality
e. The underground economic transactions
2. Which of the following would a classical macroeconomist agree with?
a. The interest rate is the price of money
b. Nominals effect real variables
c. Recessions are caused by an over production of all economic goods
d. Prices should be regulated for the people’s interests
e. Effective demand comes from prior supply
3. Which of the following is true concerning comparative advantage?
a. It can only occur when there is an absolute productivity advantage
b. It can only occur when there is “full employment”
c. It can only occur once it is discovered
d. It can never occur when there is specialisation and division of labor
e. It can never occur unless there is no “opportunity cost”
4. Suppose Mr. Jones buys $100,000 worth of IBM stock on the New York Stock Exchange.
Which of the following is true?
a. This shows up in the GDP statistics, but not the GNP statistics
b. This shows up in the GNP statistics, but not the GDP statistics
c. This shows up in the Income Version of the Quantity Theory
d. This shows up in the Fisher transactions version of the Quantity Theory
e. This shows up in both the GNP statistics and the Income version of the Quantity
Theory
5. Which of the following explains the dynamic effects of the inflation tax?
a. People in Group 3 receive the inflation tax on their cash balances
b. The inflation tax is important for government to help "balance its fiscal budget”
, c. The inflation tax is used by major corporations to take advantage and “gouge” the
consumer
d. The inflation tax forces the price level to adjust to a new monetary equilibrium
e. The expected costs and returns for holding money are important for estimating
the supply of real cash balances (Cambridge version of the Quantity Theory)
6. Suppose the government institutes an effective maximum price control on rental
apartments. Which of the following would happen?
a. A decrease in supply and an increase in demand
b. A surplus or excess supply
c. An increase in new construction of apartment housing
d. An increase in supply and a decrease of demand
e. A shortage of apartment housing
7. Which of the following is not true?
a. Frictional unemployment in the labor market arises from a lack of information in
the labor economy
b. Cyclical unemployment exists when the macro economy is in recession
c. It is logically possible for both the unemployment and the employment rates to
both simultaneously increase or decrease together
d. Structural unemployment occurs because there is a skills mismatch for jobs in
the economy
8. Which is true with respect to various versions of the quantity theory?
a. In the Fisher version, money is primarily an asset whereas in the Cambridge
version, it is primarily a medium of exchange
b. The Cambridge version is a tautological identity while the Fisher version allows
us to make a distinction between actual and desired cash holdings
c. In the Fisher version, the left side of the equation is the goods and services
transfer side and the right side is the money transfer side
d. The Income version excludes the value of all intermediate transactions in the
aggregate income circuit
e. Increasing the quantity of money (ceteris paribus) leads to the increase in its
value in all three versions
9. Using the income version of the quantity theory of money, calculate the annual inflation
rate if the following events occur: money supply increases by 4%, velocity of circulation
increases by 3%, and real quantity of output increases by 1%. The inflation rate will be:
a. 5% Inflation
b. 8% Inflation
c. 2% Inflation
d. 6% Inflation
e. 2% Deflation
