Question 1

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

Accepted Answer

The answer of A decrease in the value of money...

Question 2

The quantity equation is expressed as _____. The rate at which money changes hands is known as _____.

Accepted Answer

The answer of The quantity equation is expressed as _____....

Question 3

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 4

Money neutrality states that a change in the money supply affects _____ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in the _____.

Accepted Answer

The answer of Money neutrality states that a change in...

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

When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through an) _____ in the price level.

Accepted Answer

The answer of When the Federal Reserve injects money into...

Question 7

According to the quantity theory of money, an increase in the money supply causes the price level to _____ and the value of money to _____.

Accepted Answer

The answer of According to the quantity theory of money,...

Question 8

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

Accepted Answer

The answer of If velocity is 6, real output is...

Question 9

The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?

Accepted Answer

The answer of The classical dichotomy says that two groups...

Question 10

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

Accepted Answer

The answer of In the long run an increase in...

Question 11

When the consumer price index increases, the value of your money has _____. According to the quantity theory of money this is caused by an increase in the _____.

Accepted Answer

The answer of When the consumer price index increases, the...

Question 12

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

Accepted Answer

The answer of You hear an economist state the following:...

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

An increase in the price level causes the value of money to _____. Therefore, people will want to hold ____ money, because the cost of their purchases has increased.

Accepted Answer

The answer of An increase in the price level causes...

Question 15

A decrease in the overall price level or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

Accepted Answer

The answer of A decrease in the overall price level...

Question 16

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

Accepted Answer

The answer of An increase in the price level means...

Question 17

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

Accepted Answer

The answer of If the price level were to rise...

Question 18

An economy produces two goods, x and y. A year ago the price of x was $4 and the price of y was $6. Today the price of x is $8 and the price of y is $10. What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?

Accepted Answer

The answer of An economy produces two goods, x and...

Question 19

It takes more money to purchase the same amount of goods when prices _____. Therefore, the value of your money has ____.

Accepted Answer

The answer of It takes more money to purchase the...

Question 20

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

Accepted Answer

The answer of The theory that most economists rely on...

Quiz 17: Money Growth and Inflation

A decrease in the value of money the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as __.

The quantity equation is expressed as _. The rate at which money changes hands is known as _.

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

Money neutrality states that a change in the money supply affects _ variables only. Most economists believe that money neutrality is a good description of how money affects the economy in 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 .

When the Federal Reserve injects money into the banking system, it initially causes an excess _ of money. Equilibrium in the money market is reestablished through an) _ in the price level.

According to the quantity theory of money, an increase in the money supply causes the price level to _ and the value of money to _.

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?

In the long run an increase in the money supply causes the price level to . The price level moves in this direction because an increase in the money supply creates in the money market that causes people to spending.

When the consumer price index increases, the value of your money has _. According to the quantity theory of money this is caused by an increase in the _.

You hear an economist state the following: "The increase in the money supply will causes price to rise in the long run and will have no effect on output or any other real factors." This economist is expressing the principle of _____.

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?

An increase in the price level causes the value of money to _. Therefore, people will want to hold money, because the cost of their purchases has increased.

A decrease in the overall price level or falling prices) is called _. An extraordinarily high rate of inflation is called _.

An increase in the price level means that a dollar buys goods and services so the value of a dollar .

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

An economy produces two goods, x and y. A year ago the price of x was $4 and the price of y was $6. Today the price of x is $8 and the price of y is $10. What happened to the nominal and the real value of good x? What happened to the nominal and real value of good y?

It takes more money to purchase the same amount of goods when prices _. Therefore, the value of your money has .

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