Exam 30: Money Growth and Inflation

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

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS₂, then

The costs of inflation are

If M = 6,000, P = 3, and Y = 3,000, what is velocity?

The inflation rate is measured as the percentage change in a price index.

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

Inflation distorts relative prices. What does this mean and why does it impose a cost on society?

Changes in nominal variables are determined mostly by the quantity of money and the monetary system according to

High and unexpected inflation has a greater cost

Hyperinflation is generally defined as inflation that exceeds 50 percent per month.

The shoeleather cost of inflation refers to

For a given level of money and real GDP, an increase in velocity would lead to an increase in the price level.

During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands

Which of the following is correct?

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

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

The payments you make on your automobile loan are given in terms of dollars. As prices rise you notice you give up fewer goods to make your payments.

From the early 1980's through the 1990's, the nominal interest rate

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

When the money market is drawn with the value of money on the vertical axis, if the money supply rises