Exam 16: Inflation, Disinflation, and Deflation

It is impossible for the U.S. government to raise revenue by printing more money because the Federal Reserve, not the Treasury, issues most of the U.S. money supply.

To balance its budget, the government of Zimbabwe borrowed large amounts of money in world markets.

As people get used to inflation:

An inflation tax is:

The classical model of the price level is most likely to be a good approximation of reality during periods of:

The long-run Phillips curve shows the relationship between:

An inflation rate of 5% will increase the purchasing power of $1 to $1.10.

Use the following to answer question : Figure: AD-AS Model -(Figure: AD-AS Model) Look at the figure AD-AS Model. Suppose the economy is at Y_E with a price level of P_1. Which of the following would represent the new long-run equilibrium position if the aggregate demand curve shifted to the right from AD₁ to AD₂ as a result of an increase in the money supply?

The short-run Phillips curve represents the relationship between the unemployment rate and the rate of change in:

Inability to use monetary policy because the nominal rate of interest cannot fall below zero is called:

Reduction of inflation that is embedded in expectations is called:

Expectations of a higher inflation rate shift the short-run aggregate supply curve to the _____, changing the trade-off between inflation and unemployment. As a result, the short-run Phillips curve shifts _____.

The difference between real GDP and potential GDP is known as the:

When a central bank prints money to pay government debts, causing rising prices that erode the purchasing power of money held by the public, it is called a(n) _____ tax.

If there has been an upward movement along the fixed short-run Phillips curve, the _____ curve has shifted to the _____.

If the money held by the public is $3 billion and inflation is 6%, the inflation tax is:

The inflation tax refers to:

During an inflationary gap:

The measure that the Fed regards as the best guide to underlying inflation is the:

Use the following to answer questions : Figure: AD-AS -(Figure: AD-AS) Look at the figure AD-AS. Suppose the economy starts at E₁ and moves to E₂, where AD₂ intersects SRAS₁. Finally the economy moves to E₃. The classical model of price level assumes that the economy moves from _____; thus, inflation _____ and real GDP _____.