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Exam 30: Money Growth and Inflation

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Question 61

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The increase in the overall level of prices is known as _____.

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Question 62

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

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Question 63

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In United States history there were long periods when most prices fell.

According to the classical dichotomy and money neutrality, a doubling of the money supply, holding all else constant, causes prices to _____ and real GDP to _____.

Does an increase in the inflation rate increase or decrease the amount of money people choose to hold at any given price level? What would an increase in the inflation rate do to money demand? What would this change in money demand do to the price level?

The source of all four classic hyperinflations was high rates of money growth.

An increase in the price level means that a dollar buys __________ goods and services so the value of a dollar __________.

The _____ interest rate tells you how fast the number of dollars in your bank account will rise over time, and it is the sum of the _____ interest rate and the _____.

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

One year ago Sam purchased bonds for $100,000. He just sold them for $120,000. During the year the price level rose by 5%. If the tax rate on capital gains is 20%, how much did Sam gain in real terms?

The inflation tax alters people's behavior and creates a deadweight loss. Explain.

A decrease in the value of money __________ the quantity of money demanded. On a graph with the value of money on the vertical axis this effect on the value of money on quantity demanded is shown as ____________.

In order to maintain stable prices, a central bank must

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

Relative-price variability

For a given real interest rate, an increase in the inflation rate reduces the after-tax real interest rate.

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.

In the late 1800's deflation caused farmers to suffer as the fall in crop prices reduced their income and thus their ability to pay off their debts.

The costs of changing price tags and price listings are known as

When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, the price level increases if money demand shifts