Exam 30: Money Growth and Inflation

Your grandfather tells you that his annual income increased at an average rate of eight percent over his lifetime. He complains, however, that the average inflation rate of three percent reduced his ability to buy all the things he could have purchased if inflation had been zero. You respectfully tell your grandfather that he is committing the _____, because his annual income would have increased at an average rate of only five percent if inflation had been zero.

Sam deposits money into an account with a nominal interest rate of 4 percent. He expects inflation to be 1.5 percent. His tax rate is 32 percent. Sam's after­tax real rate of interest

Some countries have experienced an extraordinarily high rate of inflation known as . This is usually due to governments using money creation as a way to pay for their spending. The revenue the government raises by creating money is called the .

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

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

If the price level were to rise from 160 to 200, in what direction and by how much would the value of a dollar change?

During the late 19th century, the U.S. price level fell. This unexpected increase in the real cost of borrowing caused wealth to be redistributed from _____ to _____.

The money supply is 4,000, nominal GDP is 8,000, and real GDP is 2,000. Which of the following is 2?

The money demand curve is downward sloping because as the value of money falls people desire to hold a larger quantity of money.

If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is

You earn a nominal return of 6% on your savings and the tax rate is 20%. If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate of return?

The value of money falls as the price level

Between 1880 and 1896 the average level of prices in the U.S. economy

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

The price level is a

Monetary neutrality means that a change in the money supply

Suppose over some period of time the money supply tripled, velocity doubled, and real GDP doubled. According to the quantity equation the price level is now

Assuming the Fisher Effect holds, and given U.S. tax laws, an increase in inflation

Over the last 80 years, the average annual U.S. inflation rate was about

When the money supply and the price level in countries that experienced hyperinflation are plotted on a graph against time, we see that