Exam 30: Money Growth and Inflation

Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a.the Fed increases the money supply. b.people decide to demand less money at each value of money.

People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as

Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your

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

According to the classical dichotomy, which of the following is influenced by monetary factors?

Figure 30-2. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-2. At the end of 2009 the relevant money-demand curve was the one labeled MD₂. At the end of 2010 the relevant money-demand curve was the one labeled MD₁. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

If the nominal interest rate is 15 percent and the inflation rate is 5 percent, then what is the real interest rate?

If the price level increased from 120 to 130, then what was the inflation rate?

The price level rises if either

Refer to Figure 30-1. When the money supply curve shifts from MS₁ to MS₂,

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

If the money supply increased by 10% and at the same time velocity decreased by 10%, then according to the quantity equation there would be no change in the price level.

Which of the following is an example of menu costs?

If the Fed increases the money supply, then 1/P

The quantity theory of money

There was hyperinflation during the

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

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 _____.

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. At the end of 2009 the relevant money-supply curve was the one labeled MS₁. At the end of 2010 the relevant money-supply curve was the one labeled MS₂. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

Your nominal wage increases from $12 per hour to $13 per hour. At the same time, the price level increases from 140 to 147. As a result,