Exam 12: Money Growth and Inflation

Kaitlyn purchased one share of Northwest Energy stock for $200; one year later she sold that share for $400. The inflation rate over the year was 50 percent. The tax rate on nominal capital gains is 50 percent. What was the tax on Kaitlyn's capital gain?

When the money market is drawn with the value of money on the vertical axis, the value of money decreases if

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

Monetary neutrality means that while real variables may change in response to changes in the money supply, nominal variables do not.

Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

If the price level increased from 120 to 144, then what was the inflation rate?

Fifteen years ago your parents purchased some land with the idea of selling it later to help pay your college expenses. They purchased the land for $100,000. They sold it for $180,000. During the time they held it the price level rose from 80 to 120. If your parents face a 25% tax rate, what was their real after­tax gain? Hint: What's the real value of the land in current prices?)

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. -Refer to Figure 30-3. Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

From the early 1980's through the 1990's, the nominal interest rate

When money is neutral, which of the following increases when the money supply growth rate increases?

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply

Velocity is computed as the

Explain how inflation affects savings.

Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods.

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.

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an

Hyperinflations are associated with governments printing money to finance expenditures.

If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

When the Consumer Price Index falls from 110 to 100