Exam 22: Money Growth and Inflation

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

When the price level rises, the number of dollars needed to buy a representative basket of goods

Even though monetary policy is neutral in the short run, it may have profound real effects in the long run.

Indexing the tax system to take into account the effects of inflation would by itself

The price level rises if either

Evidence concerning hyperinflation indicates a clear link between the money supply and the price level for

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

The primary reason people hold money is

Velocity is

According to the quantity theory of money, an increase in the money supply causes the price level to _____ and the value of money to _____.

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 nominal interest rate is 6 percent and the inflation rate is 3 percent. What is the real interest rate?

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

The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real GDP is $200 billion. What are the price level and velocity in Muckland?

Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =

Kelly puts money in a savings account. One year later she has two percent more dollars and can buy three percent more goods. Kelly earned a real interest rate of

If M = 9,000, P = 6, and Y = 1,500, what is velocity?

Market economies rely on which of the following to allocate scarce resources?

Nominal GDP measures