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Money and Inflation

1. The document contains 7 practice questions about monetary economics and inflation for a seminar. The questions cover topics like money supply, GDP, interest rates, money demand, inflation rates, and purchasing power. 2. Additionally, the document contains 5 homework questions related to monetary economics. The homework questions calculate inflation rates, interest, present values, and real values under different economic scenarios involving price levels, money supply, velocity, and interest rates. 3. The questions are multiple choice and assess understanding of core monetary economics and inflation concepts like money supply, money demand, GDP, interest rates, inflation measurement, and purchasing power.

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Lucian Nuta
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147 views1 page

Money and Inflation

1. The document contains 7 practice questions about monetary economics and inflation for a seminar. The questions cover topics like money supply, GDP, interest rates, money demand, inflation rates, and purchasing power. 2. Additionally, the document contains 5 homework questions related to monetary economics. The homework questions calculate inflation rates, interest, present values, and real values under different economic scenarios involving price levels, money supply, velocity, and interest rates. 3. The questions are multiple choice and assess understanding of core monetary economics and inflation concepts like money supply, money demand, GDP, interest rates, inflation measurement, and purchasing power.

Uploaded by

Lucian Nuta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Seminar activity

1. If deposits amount to 500 and credits to 400, the money supply will modify by: a. 500; b. 400; c.
2500; d. 2000; e. 1000
2. Money velocity is constant. If GDP increases by 5% and money supply by 20.75%, the inflation
rate is: a. 15%; b. 15.5%; c. 15.06%; d. 12%; e. none of the above
3. Money demand for the transaction motive is: L1=50+0.5Y, where Y is the aggregate output. Money
demand for the speculative motive is L2=50-125r, where r is the interest rate. If money supply is 325
and the aggregate income is 500, the interest rate is: a. 20%; b. 25%; c. 30%; d. 10%; e. 5%
4. If prices increase by 25% on the whole, the purchasing power of the currency: a. decreases by 20%;
b. decreases by 25%; c. increases by 30%; d. stays constant; e. decreases by 70&%
5. Demand and supply for loanable funds are: D=10-20d; S=5+30d, where d is the interest rate. At
equilibrium, the interest rate and the size of loanable funds are: a. 15% and 8; b. 15% and 10; c. 10%
and 8; d. 10% and 10; e. none of the above
6. A commercial bank creates 200 million money on the basis of deposits amounting to 40 million. the
reserve ratio is: a. 10%; b. 20%; c. 30%; d. 40%; e. cannot tell
7. If in the first period prices increased 3 times and in the following period 2 times, the inflation rate
between the initial and final points in time was: a. 100%; b. 500%; c. 300%; d. 150%; e. 200%
Homework
1. Money supply and velocity increase by 10%, 1% respectively. Real GDP increases by 5%. Under
these conditions, the price level: a. increases by 8%; b. increases by 8.5%; c. increases by 5.8%; d.
decreases by 5%; e. cannot tell
2. The value of all goods and services increases 5 times, while money velocity increases by 150%. In
the beginning, M=1000. M at the beginning of the period is: a. the same; b. 1200; c. 2000; d. 3000; e.
none of the above
3. If the annual interest rate is 10%, then the present value of 1,000,000 monetary units available in
one year time is: a. 1,199,999; b. 1,000,000; c. 909,909.9; d. 800,000; e. 900,000
4. If prices in the end of 2003 are 1.25 times higher than in the beginning of 2003 and in the end of
2004 are 1.375 times higher than in the beginning of 2003, the inflation rate in 2004 was: a. 1%; b.
10%; c. 15%; d. 20%; e. 14%
5. The inflation rate of two consecutive years are 20% and 25%. If the cumulated inflation rate for
these years plus the next one has to be 65%, the inflation rate in the third year is: a. 45%; b. 10%; c.
11%; d. 35%; e. 23%
6. In a year, the interest rate was 80% and the inflation rate was 40%. What is the amount gained at the
end of a year out of a deposit of 100,000 and what will be its real value: a. 100,000 and 10,000; b.
700,000 and 6,000; c. 180,000 and 10,000; d. 180,000 and 128,571; e. none of the above
7. If price index was 240% and salaries were increased by 75% of the inflation rate, what is the real
salary index: a. 116%; b. 105%; c. 215%; d. 85.41%; e. 43.56%
8. If the price of a loaf of bread is 5.5 and the inflation rate was 10%, the price of the loaf of bread last
year was: a. 4.5; b. 5; c. 6; d. 3; e. cannot tell

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