Exam 11: The Monetary System

If the expected real interest rate in an economy is 6 percent and the expected inflation rate is 4 percent,then the nominal interest rate in the economy is ________.

The Federal Reserve attempts to keep inflation ________ and ________.

The quantity theory of money predicts that the inflation rate will be equal to ________.

Scenario: Bookland is a country that produces only books. In 1990, Bookland produced 10,000 books at a market price of $10 each. In 1991, Bookland produced 11,000 books at a market price of $12 each. -Refer to the scenario above.The rate of inflation in Bookland from 1990 to 1991 was closest to ________.

U.S.currency is not currently convertible into gold.What does this mean?

The federal funds rate is a ________.

Which statement about seigniorage is correct?

Suppose that we produce a graph with the annual inflation rate on the y-axis and the growth rate of the money supply minus the growth rate of real GDP on the x-axis.We plot the averages of each of these quantities over the past 50 years on the graph.If the countries' points do not lie approximately on the 45° line,then this lends support to the ________.

Anna,Barry,and Clara grew up together in Michigan.After college,they each went overseas to countries that had different currencies.They had a group chat in which they were comparing costs of living.So that they could understand one another,they each converted their costs into U.S.dollars.What purpose did the U.S.dollar serve in their conversation?

Suppose that inflation were 6 percent and unemployment were 10 percent.Which of the elements of the Fed's dual mandate would it be failing?

Before developing inflation expectations,Jenny reads through all available material on consumer price indexes and producer price indexes.Later,she also reads through recent magazines and newspapers to identify factors that could affect the inflation rate in the coming days.Jenny can be said to have ________.

Suppose that the rate of inflation in a country is 5 percent.Which of the following statements is accurate?

The quantity theory of money ________.

Why is real GDP a more accurate measure of the level of production in an economy than nominal GDP? Explain with an example.

If the realized real interest rate in an economy is 6 percent,the realized inflation rate is 8 percent,and the expected inflation rate is 8 percent,then the nominal interest rate in the economy is ________.

Scenario: An economy produces only cell phones. In 2015, the economy manufactured 275 cell phones, and each cell phone sold for $200. In 2016, the economy manufactured 280 cell phones, but the price of each cell phone fell to $180. -Refer to the scenario above.What is the nominal GDP of the economy in 2016?

Which is higher,the federal funds rate or interest rate on loans made from the Fed's discount window?

Which of the following is not a function of the Fed?

Menu costs refer to the ________.

When an economist describes the "money supply," she is referring to ________.