Exam 17: Money Growth and Inflation

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?)

Dollar prices and relative prices are both nominal variables.

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

Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128, what happened to the real value of Mitch's payment as opposed to what he was expecting to happen? Express your answer to the nearest 100th.

If inflation is higher than expected, then lenders receive interest payments whose real values are less than they expected.

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

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

The evidence from hyperinflations indicates that money growth and inflation

When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an

Banks advertise

If there is inflation, then a firm that has kept its price fixed for some time will have a

If P = 4 and Y = 200, then which of the following pairs of values are possible?

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

An increase in money demand would create a surplus of money at the original value of money.

Hyperinflations are associated with governments printing money to finance expenditures.

Economic variables whose values are measured in monetary units are called

According to the quantity theory of money, a 3 percent increase in the money supply

Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases

If the price level this year was 140 and was 135 last year, what was the inflation rate to the nearest decimal?

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