Exam 30: Money Growth and Inflation

Steve purchases some land for $30,000. He maintains it, but makes no improvements to it. One year later he sells it for $32,000. Stephanie puts $30,000 in a savings account that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the 35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain and who had the higher after-tax real gain?

Given a nominal interest rate of 6 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

In the last part of the 1800's

Suppose the rate of inflation rate is two percent and the nominal interest rate is five percent. According to the Fisher Effect, an increase in the inflation rate to six percent should cause the nominal interest rate to increase from five percent to _____ in the long run.

Over the past 80 years, the overall price level in the U.S. has experienced a(n)

In the long run, money demand and money supply determine

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.

Hyperinflation can be explained by

In the early 1920s U.S. consumer prices fell, while Germany experienced hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S. households (relative to German households) made _____ frequent trips to the bank and U.S. firms changed prices _____ frequently.

The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is the inflation rate?

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then

Which of the following statements concerning the history of U.S. inflation is not correct?

For a given real interest rate, a decrease in the inflation rate would

Given a nominal interest rate of 5 percent, in which of the following cases would you earn the highest after-tax real rate of interest?

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also

If inflation is less than expected, who is wealth redistributed to?

In which case is velocity the highest?

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of