Exam 17: Money Growth and Inflation: Part A

One year ago Sam purchased bonds for $100,000.He just sold them for $120,000.During the year the price level rose by 5%.If the tax rate on capital gains is 20%,how much did Sam gain in real terms?

Economists agree that increases in the money-supply growth rate increase inflation and that inflation is undesirable.So why have there been hyperinflations and how have they been ended?

If the inflation rate was 8%,and the tax rate was 20%,and you deposited money in a bank account that pays 12%,what is your after tax real interest rate? Show you work.

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?

It takes more money to purchase the same amount of goods when prices __________.Therefore,the value of your money has__________.

The nominal interest rate is eight percent and the consumer price index rises from 140 to 147.What is the real interest rate?

When the consumer price index increases,the value of your money has _____.According to the quantity theory of money this is caused by an increase in the _____.

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

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

Wages and prices are many times higher today than they were 30 years ago,yet people do not work a lot more hours or buy fewer goods.How can this be?

The costs a business incurs to change its prices are called ___________.

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

An increase in the price level causes the value of money to_____.Therefore,people will want to hold _____ money,because the cost of their purchases has increased.

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

The quantity equation is expressed as_____.The rate at which money changes hands is known as ______.

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

A decrease in the overall price level (or falling prices) is called _____. An extraordinarily high rate of inflation is called _____.

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

According to the Fisher effect,if the central bank raises the rate of money supply growth,what happens to the nominal and the real interest rate?

The consumer price index increases from 200 to 208.What is the inflation rate?