Exam 12: Money Growth and Inflation

In which case is velocity the highest?

Inflation distorts savings when real interest income, rather than nominal interest income, is taxed.

Shawn puts money into an account. One year later he sees that he has 6 percent more dollars and that his money will buy 5 percent more goods.

According to the classical dichotomy, which of the following is influenced by monetary factors?

In the long run an increase in the money supply causes the price level to __________. The price level moves in this direction because an increase in the money supply creates __________ in the money market that causes people to ________ spending.

When the money market is drawn with the value of money on the vertical axis, as the price level increases the quantity of money

An assistant manager at a restaurant gets a $100 a month raise. He figures that with his new monthly salary he cannot buy as many goods and services as he could buy last year.

You bought some shares of stock and sell them one year later. At the end of the year, the price per share was 5 percent higher and the price level was 3 percent higher. Before taxes, you experienced

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land

Norma receives an increase in her nominal income. She complains that the current inflation rate of six percent erodes the real purchasing power of her additional nominal income. This is true

When the money market is drawn with the value of money on the vertical axis, if there is a shortage of money then

If Y and V are constant and M doubles, the quantity equation implies that the price level

People go to the bank more frequently to reduce currency holdings when inflation is high. The sacrifice of time and convenience that is involved in doing that is referred to as

The country of Lessidinia has a tax system identical to that of the United States. Suppose someone in Lessidinia bought a parcel of land for 20,000 foci the local currency) in 1960 when the price index equaled 100. In 2002, the person sold the land for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20 percent. Compute the taxes on the nominal gain and the change in the real value of the land in terms of 2002 prices to find the after-tax real rate of capital gain.

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached

Your spouse complains that her 6% raise this year will not keep up with the increase in prices. In other words, she is unable to buy the same basket of goods with her 6% raise. Therefore, she believes that her

What are menu costs and why does high inflation increase menu costs?

In the long run, money demand and money supply determine

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services.