Exam 30: Money Growth and Inflation

What assumptions are necessary to argue that the quantity equation implies that increases in the money supply lead to proportional changes in the price level?

The value of money falls. This might be because the Federal Reserve

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

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.

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

With the value of money on the vertical axis, the money supply curve is

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the

The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.

Interest rates adjusted for the effects of inflation

The principle of monetary neutrality implies that an increase in the money supply will

Shoeleather cost refers to

When the money market is drawn with the value of money on the vertical axis, if the Fed sells bonds then

When inflation rises people will

In which of the following cases was the inflation rate 12 percent over the last year?

The price level rises if either

The inflation rate is measured as the percentage change in a price index.

U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real value, as opposed to the nominal value, of

Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had expected it to be. The real interest rate she pays is

Wealth is redistributed from creditors to debtors when inflation is

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