Exam 30: Money Growth and Inflation

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then

The theory that most economists rely on to explain inflation is called the __________.

During the 1970's, U.S. inflation averaged 7% each year and real GDP increased. Holding velocity constant and using the quantity equation, we conclude that

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

Velocity is computed as the

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her

For a given real interest rate, an increase in inflation makes the after-tax real interest rate

If the price level increased from 120 to 144, then what was the inflation rate?

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 higher than what was expected,

When inflation rises, the nominal interest rate

Walter puts money in a savings account at his bank earning 3.5 percent. One year later he takes his money out and notes that while his money was earning interest, prices rose 1.5 percent. Walter earned a nominal interest rate of

The price level is determined by the supply of, and demand for, money.

When the money supply and the price level in countries that experienced hyperinflation are plotted on a graph against time, we see that

Open-market purchases by the Fed make the money supply

When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply creates an excess

You put money into an account that earns an 8 percent nominal interest rate. The inflation rate is 5 percent, and your marginal tax rate is 10 percent. What is your after-tax real rate of interest?

During hyperinflations, people desire to hold less money and will go to the bank more frequently. This waste of resources due to the high rate of inflation is known as _____.