1.On backing theory principles, an attempt to increase the value of the British pound can succeed if______.

a. interest rates are low

b. interest rates are high

c. the Bank of England sterilizes its sales of pounds

d. the Fed buys pounds with its dollars

e. the Bank of England buys pound with its dollars

2.Which of the following events would lead to both inflation and a tight money condition?

a. open market purchases by the central bank

b. open market sales by the central bank

c. bank runs

d. sterilized open market purchases by the central bank

e. the creation of eurodollars

3. An American tourist spends a paper dollar in Mexico, and that dollar circulates in Mexico. On quantity theory principles, as long as that dollar stays in Mexico,

a. it will meet the definition of a eurodollar

b. it will meet the definition of a currency board

c. the American price level will be reduced

d. Mexico gets a free lunch

e. The Mexican peso will have an elevated value

4. If a central bank followed Lloyd Mints' advice to only issue money in exchange for a given physical amount of assets, then on real bills principles, the ________of the bank's money would________.

a. value, riseb. value, fallc. volatility, rised. volatility, fall

5. Quantity theorists assert that the Fed walks a tightrope between unemployment and inflation. Backing theorists deny this, because_____

a. historically, price changes precede money changes

b. the Phillips curve is actually positively-sloped

c. new money, adequately backed, is not inflationary

d. of the Cantillon effect

e. new money is issued for a given money's worth of collateral

6. On quantity theory principles, changes in the price level would _______ changes in the money supply, while on backing theory principles, changes in the money supply would ______ changes in the price level.

a. induce, reverse

b. follow, precede

c. precede, follow

d. precede, precede

e. follow, follow

7. In the space of 5 years, ______ presided over a 60% real increase in economic production, followed by the worst hyperinflation the world had ever seen.

a. Napolean Bonaparte

b. Adolf Hitler

c. John Law

d. King George V

e. John Maynard Keynes

8. As Eurodollars come to circulate in the US, the quantity theory predicts ____ and the backing theory predicts ____ in America.

a. deflation, no deflation

b. inflation, no inflation

c. inflation, inflation

d. deflation, deflation

e. deflation, inflation