Exam 12: Money, Interest, and Inflation

The quantity of money demanded will decrease if the

Suppose that real GDP grows by 3 percent a year, the quantity of money grows 6 percent a year, and velocity grows by 1 percent.In the long run, the inflation rate equals

The speed with which a dollar circulates as people use it to buy a good or service is called

The costs of inflation ________ when inflation is more rapid and ________ when inflation is more unpredictable.

What is the opportunity cost of holding money?

If real GDP decreases, there is

Suppose nominal GDP is $2,000 a year and the quantity of money is $400.Then the velocity of circulation equals

The long-run money demand curve shows

If real GDP grows by 3 percent, the velocity of circulation grows by 4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

When real GDP increases, the demand for money ________ and, as a result, the equilibrium nominal interest rate ________.

Suppose the quantity of money and real GDP do not change.If velocity increases, then the

-The above table has the demand for money schedule. a. If the Fed supplies $1.1 trillion dollars, what is the equilibrium nominal interest rate? b. Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

Mary has $1,000 and is considering purchasing a $1,000 bond that pays 7 percent interest per year.Mary decides not to buy the bond and holds the $1,000 as cash.If the inflation rate is 4 percent, the opportunity cost of holding the $1,000 as money is

If the nominal interest rate is above its equilibrium value, then

The uncertainty costs of inflation cause people to

The velocity of circulation is defined as the

The ________ the nominal interest rate, the ________ is the quantity of money demanded.

All else the same, when real GDP increases the

If the inflation rate is 3 percent and the real interest rate is 3 percent, then what is the nominal interest rate?

Inflation is a tax because as the government ________ the quantity of money, the price level ________, and the purchasing power of households' money ________.