Exam 11: Money Growth and Inflation

Which statement best describes the impact of open-market purchases by the Bank of Canada?

If velocity and output were nearly constant, the inflation rate would be equal to the money supply growth rate times what factor?

Norbert purchased 100 shares of Gentech stock for $200 per share in year 1 and sold all the shares in year 2 for $220 a share. Between year 1 and year 2, the price index increased by 5 percent. The tax on capital gains is 50 percent. If the capital gains tax is on nominal gains, how much tax does Norbert pay on his gain?

According to Hume, the classical dichotomy is useful for analyzing the economy because nominal variables are heavily influenced by developments in the monetary system, and real variables are not.

Assume you buy stock and its price rises just as much as the price level. Before taxes, what have you made?

Suppose that velocity and output are constant and that the quantity theory and the Fisher effect both hold. What happens to inflation, real interest rates, and nominal interest rates when the money supply growth rate increases from 5 percent to 7 percent?

An assistant professor of economics gets a $100-a-month raise, but then she figures that with her current monthly salary she can't buy as many goods as she could last year. What has happened to her real and nominal wage?

Which statement best describes the effect of printing money to finance government expenditures on the economy?

Why is the money supply curve vertical?

You get a wage increase from $15 per hour to $17 per hour at your landscaping job. How does this change your nominal and real wages?

Under which condition is wealth distributed from debtors to creditors?

What do shoe leather costs refer to?

According to the quantity equation, if Y doubles, V is constant, and M doubles, what factor does the price level multiply by?

Over the past 70 years, what was the approximate average annual inflation rate?

Assuming that velocity is stable, if real GDP grows by 10 percent this year, and if the money supply does not change this year, how much does the price level change by?

Figure 11-1 -Refer to Figure 11-1. If the money supply is MS2 and the value of money is 2, how much is the excess demand or supply?

Let ÄX denote a small change in the variable X. Starting from the quantity equation MV = PY, show that the following relation between percentage changes holds: ÄM/M + ÄV/V = ÄP/P + ÄY/Y. (Note: It should be emphasized that this relationship holds for small changes, say less than 5 percent. The larger the changes, the less precise are the results derived from this relationship.)

According to the quantity equation, if V and M are constant and Y doubles, what will happen to the price level?

When the money market is drawn with the value of money on the vertical axis, in which situation does the price level increase?

When and where did hyperinflation occur?