Tackle the Test: Multiple-Choice Questions

1. Question

   The real quantity of money is

   
   

   
   

   1. equal to M/P.

      
      
   
   

   2. the money supply adjusted for inflation.

      
      
   
   

   3. higher in the long run when the Fed buys government securities.

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   The real quantity of money is

2. Question

   In the classical model of the price level

   A.

   only the short-run aggregate supply curve is vertical.

   B.

   both the short-run and long-run aggregate supply curves are vertical.

   C.

   only the long-run aggregate supply curve is vertical.

   D.

   both the short-run aggregate demand and supply curves are vertical.

   E.

   both the long-run aggregate demand and supply curves are vertical.

   In the classical model of the price level

3. Question

   The classical model of the price level is most applicable in

   A.

   the United States.

   B.

   periods of high inflation.

   C.

   periods of low inflation.

   D.

   recessions.

   E.

   depressions.

   The classical model of the price level is most applicable in

4. Question

   An inflation tax is

   A.

   imposed by governments to offset price increases.

   B.

   paid directly as a percentage of the sale price on purchases.

   C.

   the result of a decrease in the value of money held by the public.

   D.

   generally levied by states rather than the federal government.

   E.

   higher during periods of low inflation.

   An inflation tax is

5. Question

   Revenue generated by the government’s right to print money is known as

   A.

   seignorage.

   B.

   an inflation tax.

   C.

   hyperinflation.

   D.

   fiat money.

   E.

   monetary funds.

   Revenue generated by the government’s right to print money is known as