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Exam 30: Money Growth and Inflation

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Question 51

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If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

A) True
B) False

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Question 52

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The theory that most economists rely on to explain inflation is called the __________.

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Question 53

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Which of the following is an example of menu costs?

The shoeleather cost of inflation refers to the

Suppose the Fed sells government bonds. Use a graph of the money market to show what this does to the value of money.

The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run.

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the

The quantity theory of money can explain hyperinflations but not moderate inflation.

The costs a business incurs to change its prices are called ___________.

When prices are falling, economists say that there is

Wealth is redistributed from creditors to debtors when inflation is

Some countries have experienced an extraordinarily high rate of inflation known as _____. This is usually due to governments using money creation as a way to pay for their spending. The revenue the government raises by creating money is called the _____.

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

The nominal interest rate is 7 percent and the inflation rate is 2 percent. What is the real interest rate?

Figure 30-3 On the following graph, MS represents the money supply and MD represents money demand. -Refer to Figure 30-3. At the end of the first year, the relevant money-supply curve was the one labeled MS₂. At the end of the second year, the relevant money-supply curve was the one labeled MS₁. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for the second year?

During the 1970s, U.S. prices rose by 7.8 percent per year and real GDP increased. Holding velocity constant and using the quantity equation, we conclude that

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Inflation can be measured by the