Question 1

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

Accepted Answer

The answer of If the government were to run a...

Question 2

Given that firms change their prices infrequently, a business that has just raised its price will have a __________ relative price; over time as its price remains fixed its relative price __________.

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The answer of Given that firms change their prices infrequently,...

Question 3

What are menu costs and why does high inflation increase menu costs?

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The answer of What are menu costs and why does...

Question 4

What direction of change in velocity could explain the price level increasing by a smaller percentage than the money supply? What would this change in velocity imply about the frequency with which money changes hands?

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The answer of What direction of change in velocity could...

Question 5

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _____ and real GDP to _____.

Accepted Answer

The answer of According to the classical dichotomy and money...

Question 6

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

Accepted Answer

The answer of In the early 1920s U.S. consumer prices...

Question 7

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 _____.

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The answer of Some countries have experienced an extraordinarily high...

Question 8

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

Accepted Answer

The answer of The _____ interest rate tells you how...

Question 9

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to _____ in the long run.

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The answer of Suppose the rate of inflation rate is...

Question 10

The idea that firms incur actual costs when they change prices is known as _____. Firms in countries with lower inflation rates will change price _____ frequently compared to those countries where inflation is higher.

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The answer of The idea that firms incur actual costs...

Question 11

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

Accepted Answer

The answer of Does an increase in the inflation rate...

Question 12

What two key assumptions does the quantity theory make concerning variables in the equation of exchange?

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The answer of What two key assumptions does the quantity...

Question 13

Your grandfather tells you that his annual income increased at an average rate of eight percent over his lifetime. He complains, however, that the average inflation rate of three percent reduced his ability to buy all the things he could have purchased if inflation had been zero. You respectfully tell your grandfather that he is committing the _____, because his annual income would have increased at an average rate of only five percent if inflation had been zero.

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The answer of Your grandfather tells you that his annual...

Question 14

Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?

Accepted Answer

The answer of Jackie saves $100 and receives $106 the...

Question 15

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147. What is the real interest rate?

Accepted Answer

The answer of The nominal interest rate is eight percent...

Question 16

According to the Fisher effect, if the central bank raises the rate of money supply growth, what happens to the nominal and the real interest rate?

Accepted Answer

The answer of According to the Fisher effect, if the...

Question 17

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

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The answer of The costs a business incurs to change...

Question 18

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

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The answer of In the long run inflation is explained...

Question 19

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as _____.

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The answer of During hyperinflations, people desire to hold less...

Question 20

The inflation tax alters people's behavior and creates a deadweight loss. Explain.

Accepted Answer

The answer of The inflation tax alters people's behavior and...

Quiz 30: Money Growth and Inflation

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

Given that firms change their prices infrequently, a business that has just raised its price will have a relative price; over time as its price remains fixed its relative price .

What are menu costs and why does high inflation increase menu costs?

What direction of change in velocity could explain the price level increasing by a smaller percentage than the money supply? What would this change in velocity imply about the frequency with which money changes hands?

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _ and real GDP to _.

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _ frequent trips to the bank and U.S. firms changed prices _ frequently.

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 _.

The ___ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _ interest rate and the ___.