Macro CH 28 sample test questions

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1 Class: Date: Macro CH 28 sample test questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The opportunity cost of holding money is the a. inflation rate minus the nominal interest rate. b. nominal interest rate. c. real interest rate. d. unemployment rate. e. inflation rate. 2. The quantity of money demanded will decrease if the a. inflation rate decreases. b. nominal interest rate decreases. c. real interest rate decreases. d. nominal interest rate increases. e. price level rises. 3. When the opportunity cost of holding money increases, then a. people want to hold more money. b. the real interest rate falls. c. the nominal interest rate falls. d. people want to hold less money. e. the quantity of money supplied increases. 4. The relationship between the nominal interest rate, the real interest rate, and the inflation rate is that the a. real interest rate is equal to the nominal interest rate plus the inflation rate. b. nominal interest rate is equal to the real interest rate plus the inflation rate. c. real interest rate is equal to the nominal interest rate multiplied by the inflation rate. d. nominal interest rate is equal to the real interest rate divided by the inflation rate. e. nominal interest rate is equal to the real interest rate minus the inflation rate. 5. The difference between the nominal interest rate and the real interest rate is the a. inflation rate. b. unemployment rate. c. GDP growth rate. d. money growth rate minus the growth rate of real GDP. e. price level. 6. Suppose the nominal interest rate on a savings bond is 5 percent a year and the inflation rate is 3 percent a year. How much is the real interest rate? a. 8 percent b. 3 percent c. 2 percent d. 7 percent e. 15 percent. 1

2 7. If the real interest rate is 6 percent and the inflation rate is 4 percent, then the nominal interest rate is a. 10 percent. b. 2 percent. c. 5 percent. d. 8 percent. e. 12 percent. 8. Barbara is willing to loan $10,000 if she can earn a real interest rate of 6 percent. Everything else the same, if the inflation rate is 2 percent, she would agree to loan the $10,000 if the nominal interest rate is a. 4 percent. b. 10 percent. c. 3 percent. d. 8 percent. e. 12 percent. 9. Assume you have a credit card balance of $2,000 at 15 percent and the inflation rate is 3 percent. What are the nominal and real interest rates? a. 15 percent nominal and 3 percent real b. 3 percent nominal and 12 percent real c. 15 percent nominal and 12 percent real d. 15 percent nominal and 18 percent real e. 12 percent nominal and 15 percent real 10. The opportunity cost of holding money a. increases as the nominal interest rate increases. b. decreases as the nominal interest rate increases. c. does not change with the changes in the nominal interest rate. d. is fixed at all interest rates. e. is the price level. 11. An increase in the nominal interest rate leads to a a. rightward shift in the demand for money curve. b. movement upward along the demand for money curve. c. leftward shift in the demand for money curve. d. movement downward along the demand for money curve. e. neither a shift in nor a movement along the demand for money curve. 12. When the nominal interest rate increases, the a. quantity of money demanded increases and there is a movement upward along the demand for money curve. b. quantity of money demanded decreases and there is a movement upward along the demand for money curve. c. demand for money increases and the demand for money curve shifts rightward. d. demand for money decreases and the demand for money curve shifts leftward. e. supply of money curve shifts rightward. 2

3 13. As the interest rate increases, the opportunity cost of holding money and the quantity of money demanded. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases e. increases; does not change because people need money 14. The relationship between the price level and the demand for money is a. inverse. b. direct. c. nonexistent. d. not clear. e. U-shaped. 15. When the price level increases, people demand money and the demand for money curve. a. more; shifts rightward b. more; shifts leftward c. less; shifts rightward d. less; shifts leftward e. the same amount of; does not shift 16. The demand for money increases and the demand for money curve shifts rightward if a. the real interest rate increase. b. the nominal interest rate increases. c. the price level increases. d. the inflation rate increases. e. real GDP decreases. 17. An increase in the price level leads to a a. rightward shift in the demand for money curve. b. movement upward along the demand for money curve. c. leftward shift in the demand for money curve. d. movement downward along the demand for money curve. e. rightward shift of the supply of money curve. 18. An increase in the price level leads to in the demand for money and an increase in real GDP leads to in the demand for money. a. an increase; an increase b. an increase; a decrease c. an decrease; a increase d. a decrease; a decrease e. no change; an increase 19. The relationship between real GDP and the demand for money is a. negative. b. positive. c. nonexistent. d. not clear. e. U-shaped. 3

4 20. When real GDP increases, the demand for money and the demand for money curve. a. increases; shifts rightward b. increases; shifts leftward c. decreases; shifts rightward d. decreases; shifts leftward e. does not change; does not shift 21. The demand for money increases and the demand for money curve shifts rightward if a. the real interest rate increases. b. the nominal interest rate increases. c. real GDP increases. d. the inflation rate increases. e. the price level falls. 22. An increase in real GDP leads to a a. rightward shift in the demand for money curve. b. movement upward along the demand for money curve. c. leftward shift in the demand for money curve. d. movement downward along the demand for money curve. e. neither a shift in the demand for money curve nor a movement along the curve. 23. Which of the following shifts the demand for money curve? i. change in the nominal interest rate ii. change in real GDP iii. change in the price level. a. i only b. ii only. c. iii only. d. ii and iii. e. i, ii, and iii. 24. Which statement most accurately describes the effect financial technology has had on the demand for money in the United States? a. Advances in financial technology have all decreased the demand for money. b. Advances in financial technology have all increased the demand for money. c. Some advances in financial technology have increased while others have decreased the demand for money. d. Advances in financial technology have had no effect on the demand for money. e. It is not possible to tell what would be the effect because financial technology has not changed over the past two decades. 25. The increased use of credit cards leads to a. a rightward shift in the demand for money curve. b. a movement upward along the demand for money curve. c. a leftward shift in the demand for money curve. d. a movement downward along the demand for money curve. e. no movement along the demand curve for money nor a shift in the demand curve. 4

5 26. In the above figure, a movement from point A to point B represents a. an increase in the demand for money that might be the result of an increase in real GDP. b. a decrease in the demand for money that might be the result of a fall in the price level. c. a decrease in the quantity of money demanded. d. an increase in the quantity of money demanded. e. an increase in the demand for money that might be the result of a fall in the price level. 27. In the above figure, a movement from point B to point C represents a. an increase in the demand for money that might be the result of an increase in real GDP. b. a decrease in the demand for money that might be the result of an increase in real GDP. c. a decrease in the quantity of money demanded. d. a increase in the quantity of money demanded. e. an increase in the demand for money that might be the result of a fall in the price level. 28. From the 1970s to 2005, as a fraction of GDP, the quantity of money that people and businesses have held has been a. decreasing. b. increasing. c. fluctuating erratically. d. independent of people's use of credit cards. e. changing only as the interest rate changed. 29. Every day, changes to make the quantity of money demanded equal the quantity of money supplied. a. real GDP b. the money supply c. the price level d. the nominal interest rate e. the inflation rate 5

6 30. Other things the same, if the Fed increases the quantity of money, the supply of money curve shifts a. rightward and the nominal interest rate decreases. b. leftward and the nominal interest rate increases. c. rightward and the real interest rate increases. d. leftward and the real interest rate increases. e. leftward and the nominal interest rate decreases. 31. In the money market, if real GDP increases, then the demand for money and the equilibrium nominal interest rate. a. increases; rises b. increases; falls c. decreases; rises d. decreases; falls e. increases; does not change 32. In the above figure, if the interest rate is 8 percent per year, the quantity of money demanded is a. less than the quantity of money supplied and the interest rate will change. b. greater than the quantity of money supplied and the interest rate will change. c. less than the quantity of money supplied and the demand curve for money will shift. d. greater than the quantity of money supplied and the demand curve for money will shift. e. greater than the quantity of money supplied and the supply curve of money will shift. 33. In the above figure, the equilibrium interest rate is and the equilibrium quantity of money is trillion. a. 8 percent; $1.2 b. 4 percent; $0.6 c. 4 percent; $1.2 d. 8 percent; $0.6 e. 0 percent; $1.2 6

7 34. In the above figure, if the interest rate is 3 percent per year, the quantity of money demanded is a. less than the quantity of money supplied and the interest rate will change. b. greater than the quantity of money supplied and the interest rate will change. c. less than the quantity of money supplied and the demand curve for money will shift. d. greater than the quantity of money supplied and the demand curve for money will shift. e. greater than the quantity of money supplied and the supply curve of money will shift. 35. In the above figure, if the interest rate is 2 percent per year, the quantity of money demanded is a. less than the quantity of money supplied and the interest rate will change. b. greater than the quantity of money supplied and the interest rate will change. c. less than the quantity of money supplied and the demand curve for money will shift. d. greater than the quantity of money supplied and the demand curve for money will shift. e. greater than the quantity of money supplied and the supply curve of money will shift. 36. When the Fed increases the quantity of money, a. the price level immediately increases. b. the price level is slow to change. c. the nominal interest rate immediately increases but the real interest rate does not change. d. real GDP immediately decreases. e. both the nominal interest rate and real interest rate immediately increase. 37. In the long run, an increase in the quantity of money the nominal interest rate and the real interest rate. a. raises; raises b. raises; does not change c. lowers; lowers d. lowers; does not change e. lowers; raises 38. In the long run, when the Fed increases the quantity of money, the a. price level rises. b. nominal interest rate falls. c. demand for money decreases. d. price level falls. e. real interest rate rises. 39. In the long run, an increase in the quantity of money leads to a. an equal percentage increase in the real interest rate. b. a smaller percentage increase in the real interest rate. c. an equal percentage increase in the price level. d. a smaller percentage increase in the price level. e. no effect on the price level or on real GDP. 40. The proposition that in the long run when real GDP equals potential GDP, an increase in the quantity of money leads to an equal percentage increase in the price level is the called the quantity theory of a. constant velocity. b. inflation. c. money. d. equal change. e. the long run. 7

8 41. When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage a. increase in the price level. b. increase in real GDP. c. decrease in the price level. d. decrease in velocity. e. decrease in real GDP. 42. Using the quantity theory of money, in the long run a 3 percent increase in the quantity of money leads to a 3 percent a. increase in the price level. b. increase in the real interest rate. c. decrease in the price level. d. decrease in the real interest rate. e. increase in real GDP. 43. Velocity is V, the quantity of money is M, the price level is P, and real GDP is Y. Which of the following formulas is correct? a. V = (P Y) M b. V = (P + Y) M c. Y = V M d. Y = (P M) V e. Y = (P + M) V 44. If nominal GDP is $6.0 trillion and the quantity of money is $1.5 trillion, then the a. price level is 110. b. price level is 120. c. velocity of circulation is 4. d. velocity of circulation is 10. e. price level is If real GDP is $200, the price level is 2.5, and velocity is 5, then the quantity of money is a. $200. b. $100. c. $750. d. $1,000. e. $ Suppose the quantity of money is $1,000, the velocity of circulation is 6, and real GDP is $4,000. Then the price level is a b c d e

9 47. Suppose nominal GDP is $2,000 a year and the quantity of money is $400. Then the velocity of circulation equals a. 5. b c. 10. d. 2. e If the price level is 2, real GDP is $50 billion, and the money supply is $4 billion, then velocity is a. 4. b. 10. c. 25. d e If velocity does not change and the quantity of money grows at the same rate as does real GDP, then in the long run a. the inflation rate equals the growth rate of the quantity of money. b. the nominal interest rate is less than the real interest rate. c. the real interest rate is less than the nominal interest rate. d. the inflation rate equals zero. e. the nominal interest rate equals zero. 50. If velocity does not change and if real GDP and the quantity of money grow at the same rate, then the price level a. rises and the inflation rate is negative. b. falls and the inflation rate is negative. c. does not change and the inflation rate is zero. d. rises and the inflation rate is positive. e. falls and the inflation rate is positive. 51. Suppose that real GDP grows by 3 percent a year, the quantity of money grows 6 percent a year, and velocity grows by 1 percent. In the long run, the inflation rate equals a. 9 percent. b. 4 percent. c. 5 percent. d. 12 percent. e. 10 percent. 52. Suppose that real GDP grows by 3 percent a year, the quantity of money grows 5 percent a year, and velocity does not change. In the long run, the inflation rate equals a. 8 percent. b. 3 percent. c. 5 percent. d. 2 percent. e. 10 percent. 9

10 53. If the quantity of money starts to grow more rapidly than real GDP and velocity does not change, the result is a. more rapid growth in potential GDP. b. the inflation rate rises. c. an increase in investment. d. an eventual slowing in the growth rate of the quantity of money. e. slower growth in the price level. 54. If the inflation rate increases, a. the velocity of circulation increases. b. potential GDP increases. c. real GDP growth increases. d. the nominal interest rate falls. e. the real interest rate rises. 55. Hyperinflation is defined as periods of a. negative price changes. b. low inflation. c. inflation over 50 percent per month. d. inflation under 10 percent per year. e. inflation over 25 percent per year 56. Inflation at a rate that exceeds 50 percent per month is called a. extreme inflation. b. super inflation. c. hyperinflation. d. megainflation. e. skyflation. 57. Hyperinflation a. occurs in the United States during each business cycle. b. occurs only in theory, never in reality. c. has never occurred in the United States. d. happens in all countries at some time during their business cycle. e. is a period of time when inflation exceeds 20 percent per year. 58. In the early 1920s, Germany experienced hyperinflation because Germany's a. economy was growing too rapidly. b. population was growing too rapidly. c. quantity of money was growing too rapidly. d. real GDP was growing faster than nominal GDP. e. demand for money skyrocketed. 59. During the early 1920s, Germany experienced a. negative inflation as a result of high money creation. b. hyperinflation as a result of low money creation. c. moderate price changes as a result of a recession. d. hyperinflation as a result of high money creation. e. hyperinflation as a result of rapidly increasing demand for money. 10

11 60. High inflation a. leads to a more correct allocation of resources. b. lowers the price level. c. decreases uncertainty. d. makes it easier to use money as a standard of account. e. makes money function less well as a store of value. 61. During an inflation, a household with savings of $100,000 a. gains because inflation increases the value of their savings. b. loses because the inflation increases the after-tax real interest rate. c. gains because the inflation gives savers more money and so more purchasing power. d. loses because inflation increases the real tax on the interest paid. e. neither gains nor loses because inflation does not affect savers. 62. One effect of inflation is that it is a tax that redistributes goods and services from a. government to households. b. investors to savers. c. government to businesses. d. households and businesses to the government. e. businesses to households 63. Inflation the cost of holding money and the after-tax real interest rate. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases e. increases; does not change 64. Assume an economy begins with zero inflation, a 25 percent income tax rate, and a real interest rate of 4 percent. If inflation rises to 4 percent, the nominal interest rate becomes percent and the after-tax real interest becomes percent. a. 0; 1 b. 8; 2 c. 8; 4 d. 6; 2 e. 8; The "shoe-leather costs" of inflation are the costs from a. higher prices for all goods, including necessities such as shoes. b. the government taking a higher percentage of interest income. c. confusion as people lose track of real costs and benefits. d. time spent trying to spend money quickly. e. higher taxes due to higher inflation. 66. Shoe-leather costs of inflation arise from the a. increasing costs of apparel (clothes and shoes) as inflation rises. b. increase of velocity as inflation rises. c. decline in the use of money as a unit of account. d. increasing costs of agricultural products as inflation rises. e. confusion that results from higher inflation. 11

12 67. If inflation is making it difficult for people to estimate the true marginal benefits and true marginal costs of activities, inflation is leading to a. tax costs. b. shoe-leather costs. c. confusion costs. d. uncertainty costs. e. increased economic growth. 68. The dominant factor why the nominal interest rate differs among nations is that differs among nations. a. potential GDP b. the unemployment rate c. inflation rate d. the price level e. the quantity of money 69. If the inflation rate is zero, the nominal interest rate is a. greater than the real interest rate. b. less than the real interest rate. c. equal to the real interest rate. d. equal to the inflation rate. e. positive and the real interest rate is negative. 70. The long-run effect of a decrease in the growth rate of the quantity of money is a a. lower real interest rate. b. higher real interest rate. c. lower nominal interest rate. d. higher nominal interest rate. e. higher inflation rate. 71. The long-run effect of an increase in the growth rate of the quantity of money is a a. lower real interest rate. b. higher real interest rate. c. lower nominal interest rate. d. higher nominal interest rate. e. lower inflation rate. 72. If the Fed wants to lower the nominal interest rate in the long run, the Fed the growth rate of the money supply. a. raises b. lowers c. does not change d. first lowers and then raises e. None of the above answers are correct because the premise of the question is wrong since the Fed cannot affect the nominal interest rate, only the real interest rate. 12

13 73. In the long run, the real interest rate is 3 percent, real GDP grows at 4 percent, velocity is constant, and the quantity of money grows at 8 percent. The nominal interest rate is a. 6 percent. b. 7 percent. c. 8 percent. d. 10 percent. e. 12 percent. 74. In the long run, the real interest rate is 3 percent, real GDP grows at 4 percent, velocity is constant, and the quantity of money grows at 6 percent. The nominal interest rate is a. 3 percent. b. 4 percent. c. 5 percent. d. 10 percent. e. 6 percent. 75. In the short run, an increase in the growth rate of the money supply the nominal interest rate and in the long run it the nominal interest rate. a. raises; raises b. raises; lowers c. lowers; raises d. lowers; lowers e. does not change; raises 76. In the long run, an increase in the growth rate of the money supply the inflation rate and the nominal interest rate. a. raises; raises b. raises; lowers c. lowers; raises d. lowers; lowers e. raises; does not change 77. In the long run, when an economy experiences inflation, the price level and the nominal interest rate. a. rises; remains constant b. remains constant; rises c. rises; rises d. falls; rises e. rises; falls 78. During the 1990s, Canada had an average inflation rate of 1.5 percent while Columbia had an average inflation rate of 21.5 percent. You would expect that nominal interest rates in Canada are a. less than nominal interest rates in Columbia. b. equal to nominal interest rates in Columbia. c. greater than nominal interest rates in Columbia. d. unpredictably different from nominal interest rates in Columbia. e. not comparable to nominal interest rates in Columbia. 13

14 79. Inflation decreases the growth of capital because i. when the after-tax real interest rate falls, savings decreases. ii. velocity increases when inflation increases. iii. the higher the inflation rate, the higher is the true income tax rate on income from capital.. a. i only. b. ii only. c. iii only. d. i and iii. e. i, ii, and iii. 80. During a period of hyperinflation, as households and firms avoid holding money a. potential GDP increases. b. long term savings accounts become more popular. c. barter becomes more common. d. capital investment increases. e. the costs of inflation decrease. 14

15 Macro CH 28 sample test questions Answer Section MULTIPLE CHOICE 1. ANS: B PTS: 1 DIF: Level 1: Definition TOP: Opportunity cost of holding money 2. ANS: D PTS: 1 DIF: Level 2: Using definitions TOP: Opportunity cost of holding money 3. ANS: D PTS: 1 DIF: Level 2: Using definitions TOP: Opportunity cost of holding money 4. ANS: B PTS: 1 DIF: Level 1: Definition TOP: Interest rates 5. ANS: A PTS: 1 DIF: Level 1: Definition TOP: Interest rates 6. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Interest rates 7. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Interest rates 8. ANS: D PTS: 1 DIF: Level 3: Using models TOP: Interest rates 9. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Interest rates 10. ANS: A PTS: 1 DIF: Level 1: Definition TOP: Demand for money 11. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 12. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 13. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 14. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Price level 15. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Price level 16. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Price level 17. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Price level 18. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Price level and real GDP 19. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Real GDP 20. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Real GDP 21. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Real GDP 1

16 22. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money Real GDP 23. ANS: D PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 24. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 25. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Demand for money 26. ANS: D PTS: 1 DIF: Level 3: Using models TOP: Demand for money 27. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Demand for money 28. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Eye on the U.S. economy Money and credit cards 29. ANS: D PTS: 1 DIF: Level 2: Using definitions TOP: Money market equilibrium 30. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Money market equilibrium 31. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Money market equilibrium 32. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Money market equilibrium 33. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Money market equilibrium 34. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Money market equilibrium 35. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Money market equilibrium 36. ANS: B PTS: 1 DIF: Level 2: Using definitions TOP: The money market in the long run 37. ANS: B PTS: 1 DIF: Level 3: Using models TOP: The money market in the long run 38. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Money and the price level 39. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Money and the price level 40. ANS: C PTS: 1 DIF: Level 1: Definition TOP: Quantity theory of money 41. ANS: A PTS: 1 DIF: Level 1: Definition TOP: Quantity theory of money 42. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Quantity theory of money 43. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 44. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 45. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 2

17 46. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 47. ANS: A PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 48. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Equation of exchange 49. ANS: D PTS: 1 DIF: Level 3: Using models TOP: Money growth and inflation 50. ANS: C PTS: 1 DIF: Level 3: Using models TOP: Money growth and inflation 51. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Money growth and inflation 52. ANS: D PTS: 1 DIF: Level 3: Using models TOP: Money growth and inflation 53. ANS: B PTS: 1 DIF: Level 3: Using models TOP: Money growth and inflation 54. ANS: A PTS: 1 DIF: Level 2: Using definitions TOP: Money growth and inflation 55. ANS: C PTS: 1 DIF: Level 1: Definition TOP: Hyperinflation 56. ANS: C PTS: 1 DIF: Level 1: Definition TOP: Hyperinflation 57. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Hyperinflation 58. ANS: C PTS: 1 DIF: Level 2: Using definitions TOP: Eye on the past Hyperinflation in Germany in the 1920s 59. ANS: D PTS: 1 DIF: Level 2: Using definitions TOP: Eye on the past Hyperinflation in Germany in the 1920s 60. ANS: E PTS: 1 DIF: Level 2: Using definitions OBJ: Checkpoint 28.3 TOP: Costs of inflation 61. ANS: D PTS: 1 DIF: Level 2: Using definitions OBJ: Checkpoint 28.3 TOP: Costs of inflation 62. ANS: D PTS: 1 DIF: Level 2: Using definitions OBJ: Checkpoint 28.3 TOP: Inflation as a tax 63. ANS: B PTS: 1 DIF: Level 2: Using definitions OBJ: Checkpoint 28.3 TOP: Costs of inflation Taxes and interest 64. ANS: B PTS: 1 DIF: Level 3: Using models OBJ: Checkpoint 28.3 TOP: Costs of inflation Taxes and interest 65. ANS: D PTS: 1 DIF: Level 1: Definition OBJ: Checkpoint 28.3 TOP: Costs of inflation Shoe-leather 66. ANS: B PTS: 1 DIF: Level 1: Definition OBJ: Checkpoint 28.3 TOP: Costs of inflation Shoe-leather 67. ANS: C PTS: 1 DIF: Level 2: Using definitions OBJ: Checkpoint 28.3 TOP: Costs of inflation Confusion 68. ANS: C PTS: 1 DIF: Level 3: Using models 69. ANS: C PTS: 1 DIF: Level 1: Definition 3

18 70. ANS: C PTS: 1 DIF: Level 4: Applying models 71. ANS: D PTS: 1 DIF: Level 2: Using definitions 72. ANS: B PTS: 1 DIF: Level 4: Applying models 73. ANS: B PTS: 1 DIF: Level 5: Critical thinking 74. ANS: C PTS: 1 DIF: Level 5: Critical thinking 75. ANS: C PTS: 1 DIF: Level 5: Critical thinking 76. ANS: A PTS: 1 DIF: Level 4: Applying models 77. ANS: C PTS: 1 DIF: Level 4: Applying models 78. ANS: A PTS: 1 DIF: Level 5: Critical thinking 79. ANS: D PTS: 1 DIF: Level 4: Applying models 80. ANS: C PTS: 1 DIF: Level 4: Applying models 4