AP Macro AP Macro Money and Inflation

Question 1

The quantity theory of money is expressed as MV = PQ. What does 'V' represent?

Accepted Answer

The velocity of money

Answer

The volume of exports

Answer

The value of government bonds

Answer

The variance in price levels

Question 2

Which type of inflation is caused by increases in production costs such as rising wages or raw material prices?

Accepted Answer

Cost-push inflation

Answer

Demand-pull inflation

Answer

Built-in inflation

Answer

Hyperinflation

Question 3

If the money supply grows faster than real GDP, the most likely result according to the quantity theory is:

Accepted Answer

Inflation

Answer

Deflation

Answer

Recession

Answer

Lower interest rates

Question 4

Which of the following groups is MOST harmed by unexpected inflation?

Accepted Answer

Savers holding cash or fixed-income assets

Answer

Borrowers with fixed-rate loans

Answer

Homeowners with mortgages

Answer

Businesses with variable-cost contracts

Question 5

Hyperinflation is most directly associated with:

Accepted Answer

A government printing excessive amounts of money to finance deficits

Answer

A sudden decrease in consumer spending

Answer

An increase in the reserve requirement

Answer

A trade surplus

Question 6

The Fisher Effect states that the nominal interest rate equals:

Accepted Answer

The real interest rate plus the expected inflation rate

Answer

The real interest rate minus the inflation rate

Answer

The money supply growth rate minus GDP growth

Answer

The federal funds rate plus the discount rate

The quantity theory of money is expressed as MV = PQ.What does 'V' represent?