Question 1

Wealth is redistributed from creditors to debtors when inflation is

Accepted Answer

When inflation is unexpectedly high, creditors are paid back with dollars that have less purchasing power than the dollars they initially loaned out. This means that debtors are able to pay back their loans with cheaper dollars, effectively transferring wealth from creditors to debtors. High expected inflation, on the other hand, is typically "priced in" to loans beforehand and does not have the same redistributive effect. Low inflation, whether expected or not, does not lead to wealth redistribution from creditors to debtors.

Question 2

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's after­tax real rate of interest

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Question 3

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after­tax real rate of interest

Accepted Answer

The answer of Tara deposits money into an account with...

Question 4

Wealth is redistributed from debtors to creditors when inflation is

Accepted Answer

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Question 5

Which movie is an allegory about late 19th century monetary policy?

Accepted Answer

The Wizard of Oz is often interpreted as an allegory about late 19th century monetary policy, particularly the debate over whether to use gold or silver as the standard for currency. The yellow brick road is said to represent the gold standard, while the silver slippers (changed to ruby shoes in the movie) represent silver. The character of the Wicked Witch of the East has been interpreted as representing financial institutions controlling monetary policy, while the character of the Wizard himself is seen as a symbol of the political class.

Question 6

High and unexpected inflation has a greater cost

Accepted Answer

If inflation increases wages by as much as the increase in prices, then the real wage rate (purchasing power) stays the same, and there is no significant cost to workers that experience this kind of inflation. Holders of large amounts of money or borrowers can adjust to unexpected inflation more easily than people who hold a little money or save. Additionally, taxes are assessed against nominal interest earnings, so higher tax rates would affect savers more, irrespective of the tax bracket. Therefore, out of the given options, those whose wages increase by as much as inflation have the least impact on inflation's high and unexpected cost than the other groups.

Question 7

If inflation is higher than what was expected,

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Question 8

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

Accepted Answer

The discovery of gold on the Klondike River led to an increase in price levels. This benefited debtors as the value of their assets, including gold, increased. At the same time, this was at the expense of creditors who had to accept repayment in dollars that were now worth less due to inflation.

Question 9

High and unexpected inflation has a greater cost

Accepted Answer

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Question 10

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

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Question 11

Between 1880 and 1886, prices that were

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...

Question 12

High and unexpected inflation has a greater cost

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Question 13

If the economy unexpectedly went from inflation to deflation,

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Question 14

Wealth is redistributed from creditors to debtors when inflation was expected to be

Accepted Answer

When inflation is expected to be low, creditors lend money at a low interest rate, assuming they will be repaid with money worth the same value. However, if inflation turns out to be high, the money they are repaid with is worth less. This means that creditors lose out and debtors benefit from the redistribution of wealth.

Question 15

If inflation is lower than what was expected,

Accepted Answer

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Question 16

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Accepted Answer

The difference between actual and expected inflation transferred wealth from the borrower to you, as they had to pay a higher interest rate than they had anticipated. This caused your after-tax real interest rate to be higher by 0.5 percentage points than what you had expected.

Question 17

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Accepted Answer

When inflation is higher than expected, the real interest rate earned will actually be lower than expected because the inflation rate eats away at the purchasing power of the interest earned. This means that the real value of the loan will also be lower than she had expected because the inflation rate has decreased the value of the money lent out. Therefore, the correct answer is D.

Question 18

Wealth is redistributed from debtors to creditors when inflation was expected to be

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Question 19

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

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Question 20

Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had expected it to be. The real interest rate she pays is

Accepted Answer

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Quiz 30: Money Growth and Inflation

Wealth is redistributed from creditors to debtors when inflation is

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's aftertax real rate of interest

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's aftertax real rate of interest

Wealth is redistributed from debtors to creditors when inflation is

Which movie is an allegory about late 19th century monetary policy?

High and unexpected inflation has a greater cost

If inflation is higher than what was expected,

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

High and unexpected inflation has a greater cost

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

Between 1880 and 1886, prices that were

High and unexpected inflation has a greater cost

If the economy unexpectedly went from inflation to deflation,

Wealth is redistributed from creditors to debtors when inflation was expected to be

If inflation is lower than what was expected,

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Wealth is redistributed from debtors to creditors when inflation was expected to be

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had expected it to be. The real interest rate she pays is

Quiz 30: Money Growth and Inflation

Wealth is redistributed from creditors to debtors when inflation is

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's after­tax real rate of interest

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after­tax real rate of interest

Wealth is redistributed from debtors to creditors when inflation is

Which movie is an allegory about late 19th century monetary policy?

High and unexpected inflation has a greater cost

If inflation is higher than what was expected,

In 1898, prospectors on the Klondike River discovered gold. This discovery caused an unexpected price level

High and unexpected inflation has a greater cost

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

Between 1880 and 1886, prices that were

High and unexpected inflation has a greater cost

If the economy unexpectedly went from inflation to deflation,

Wealth is redistributed from creditors to debtors when inflation was expected to be

If inflation is lower than what was expected,

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1 percent, but people had been expecting 1.5 percent. This difference between actual and expected inflation

Marta lends money at a fixed interest rate and then inflation turns out to be higher than she had expected it to be. The real interest rate she earns is

Wealth is redistributed from debtors to creditors when inflation was expected to be

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent. This difference between actual and expected inflation

Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had expected it to be. The real interest rate she pays is

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's aftertax real rate of interest

Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's aftertax real rate of interest