Exam 30: Money Growth and Inflation

If the government were to run a budget deficit and wanted to finance it by printing money, would it have the central bank conduct open market purchases or open market sales?

If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If M increases to 25,000 but V and Y do not change, what happens to the price level? Are the change in the money supply and the change in the price level proportional?

The idea that firms incur actual costs when they change prices is known as _____. Firms in countries with lower inflation rates will change price _____ frequently compared to those countries where inflation is higher.

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

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

An increase in money demand would create a surplus of money at the original value of money.

Which of the following helps to explain why the "inflation fallacy" is a fallacy?

The quantity equation is M x V = P x Y.

If money demand shifts right, the price level falls.

The inflation tax refers to

Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104. What is nominal interest rate on Jackie's saving? What is the real interest rate on Jackie's saving? What was the inflation rate?

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

Figure 30-2 In the graph, MS represents the money supply and MD represents money demand. The vertical axis is the value of money measured as 1/P and the horizontal axis is the quantity of money. -Refer to Figure 30-2. What quantity is measured along the vertical axis?

In the long run inflation is explained by __________. For countries that had hyperinflation this source of inflation arose primarily because the government __________.

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

Why did farmers in the late 1800s dislike deflation?

According to the classical dichotomy, what changes nominal variables? What changes real variables?

On a given morning, Franco sold 40 pairs of shoes for a total of $800 at his shoe store.

List and define any two of the costs of high inflation.

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