Question 1

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 _____.

Accepted Answer

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

Question 2

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 _____.

Accepted Answer

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

Question 3

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.

Accepted Answer

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

Question 4

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.

Accepted Answer

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

Question 5

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 6

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 7

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 8

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 central...

Question 9

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...

Question 10

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

Accepted Answer

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

Question 11

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 12

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

Accepted Answer

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

Question 13

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?

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

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 __________.

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

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.

Accepted Answer

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

Question 18

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 19

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 20

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...

Quiz 17: Money Growth and Inflation: Part A

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 _.

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 _____.

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.

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?

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?

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

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?

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

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

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?

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

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?

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

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 .

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

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.

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.

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 ___.

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 ___.