Exam 11: Money Growth and Inflation

How is the supply of money determined?

According to the principle of monetary neutrality,what will an increase in the quantity of money also increase?

The country of Aquilonia has a tax system identical to that of Canada.Suppose an Aquilonian bought a parcel of land for $10,000 in 1960 when the price index equalled 100.In 2016,the person sold the land for $100,000,and the price index equalled 500.If the person must pay 20 percent of any capital gain in taxes,what is the after-tax real capital gain (in 2016 dollars)on the land?

This problem compares the effect of a tax on interest earnings over a number of years,when interest is compounded annually.Suppose you purchase $1000 worth of mutual funds paying an average of 5 percent per year. a)How much is your interest after 30 years if there was no tax on interest? b)How much is your interest after 30 years if there is a 20 percent tax on interest earnings?

What kind of variables are the interest rates usually published in newspapers such as the Financial Post?

The money supply in Freedonia is $100 billion.Nominal GDP is $800 billion and real GDP is $400 billion.The central bank of Freedonia has instituted a policy of zero inflation.Assuming that velocity is stable,if real GDP grows by 20 percent this year,how will the central bank of Freedonia change the money supply this year?

Suppose that velocity and output are constant and that the quantity theory and Fisher effect are both correct.If the nominal interest rate is 8 percent and inflation is 4 percent,what is the money supply growth rate or the real interest rate?

In a graph having the price level P on the vertical axis and the quantity of money M on the horizontal axis and considering V and Y independent on the price level or the quantity of money demanded,draw the Md - P curve that is implied by the quantity equation.Show how the P?2-Md curve changes when Y changes.

Explain the adjustment process that creates a change in the price level when the money supply increases.

When the money market is depicted in a diagram with the value of money on the vertical axis,in which situation does the value of money increase?

Suppose the Bank of Canada sells government bonds.Use a graph of the money market to show what this does to the value of money.

When the money market is depicted in a diagram with the value of money on the vertical axis,which statement best describes the effects of an increase in money supply?

What is the inflation tax,and how might it explain the creation of inflation by a central bank?

Over the past 70 years,what was the approximate average annual inflation rate?

What are people required to report on income tax forms?

According to the quantity equation,when velocity is stable,which of the following best describes the effects of an increase in the money supply?

Trent bought a parcel of land for $20,000 in 1960 when the price index was 100; he sold it in 2016,when the price index was 600,for $100,000.If Trent must pay 20 percent of any capital gain in taxes,what is his after-tax real capital gain (in 2016 dollars)?

Assuming that V is constant,what could result from an increase in M in the quantity equation?

According to the quantity equation,if P = 15,Y = 100,and M = 250,what is V?

If a country had deflation of 2 percent while the nominal interest rate increased by 1 percentage point,how would the real interest rate change?