Econ-201 Money Growth And Inflation

Front 1

What happens to money as the price level increases?

Back 1

The value of money falls.

Front 2

The velocity of money is:

Back 2

The rate at whcih money changes hands.

Front 3

According to monetary neutrality, a change in money supply will:

Back 3

Not affect real variables.

Front 4

A decrease in the price level indicates:

Back 4

That the economy has experienced deflation.

Front 5

According to the quantity equation, if the supply of money increases:

Back 5

The nominal value of output (P x Y) will increase.

Front 6

The government of Bunora prints money. Inflation and government revenues increase. This is an example of:

Back 6

An inflation tax

Front 7

Suppose the economy is initially in monetary equilibrium. The Federal Reserve then increases the money supply. As a result:

Back 7

The quantity of money demanded will be less than the quantity of money supplied, and the price level will increase.

Front 8

An analysis of countries experiencing rapid rates of inflation indicates that inflation generally the result of:

Back 8

Allowing the money supply to grow too rapidly.

Front 9

Suppose the nominal interest rate is 7%. The rate of inflation is 2%. The real interest rate is:

Back 9

5%

Front 10

One of the main determinants of the quantity of money demanded is:

Back 10

THe price level

Front 11

The money supply in the U.S. economy is determined by:

Back 11

The Federal Reserve

Front 12

The equation of exchange states that:

Back 12

MV = PY

Front 13

The "shoeleather" costs of inflation refer to:

Back 13

The fact that people waste resources by trying to avoid inflation.

Front 14

According to the Fisher effect, an increase in the money supply will:

Back 14

Cause an increase in inflation and higher nominal interest rates.

Front 15

The fallacy committed by those who believe that each family is hurt financially when the inflation rate rises is the failure to realize that:

Back 15

When inflation goes up, family incomes rise.

Front 16

What does the quantity theory of money state?

Back 16

The price level varies in proportion to the money supply.

Front 17

One of the consequences of inflation is that it:

Back 17

Creates confusion and inconvenience resulting from changes in the unit of account.

Front 18

When the money supply increases, the value of money:

Back 18

Decreases

Front 19

What is the primary result of inflation?

Back 19

A decline in the value of money.

Front 20

The theoretical separation of nominal and real variables is known as:

Back 20

The classical dichotomy

Front 21

The relationship of the money demand curve to the value of money is shown by its:

Back 21

Downward slope

Front 22

The primary effect of an increase in the money supply would be:

Back 22

A proportional increase in prices.

Front 23

Given the quantity theory of money, if the quantity of money were doubled, then prices would:

Back 23

Double

Front 24

What does the demand curve for money show?

Back 24

The amount of money that individuals and businesses wish to hold at various price levels.

Front 25

If the monetary authorities continue over time to expand the supply of money more rapidly than real output, the result will be:

Back 25

Inflation

Front 26

The value of money is equal to:

Back 26

1/P

Front 27

Suppose the rate of inflation is 2% and the real interest rate is 5%. The nominal interest rate will be:

Back 27

7%

Front 28

What happens to money as the price level increases?

Back 28

The quantity of money demanded increases.

Front 29

When an economy experiences inflation, the quantity of money will:

Back 29

Increase, due to higher prices.

Front 30

The Fisher Effect suggests that:

Back 30

An increase in the money supply will increase nominal interest rates.

Front 31

The quantity of rice produced by a rice farmer is an example of:

Back 31

A real variable

Front 32

The quantity equation states that:

Back 32

Velocity is relatively stable over time.

Front 33

What causes debtors to benefit at the expense of creditors?

Back 33

Inflation

Front 34

The inflation tax refers to:

Back 34

The revenue the government raises by creating money.

Front 35

The cost of printing new price lists is an example of:

Back 35

Menu costs

Front 36

Fed action to increase the money supply will impact the economy by:

Back 36

Causing the public to spend excess cash balances they are holding.

Front 37

According to the quantity theory of money, the principal result of an increase in the supply of money is to:

Back 37

Increase the price level.

Front 38

One of the clear effects of inflation is that it:

Back 38

Makes markets less efficient by distorting relative prices and consumer decisions.

Front 39

Why isn't the money supply responsive to changes in the price level?

Back 39

Because it is fixed by the Federal Reserve.

Front 40

The value of money will decrease during:

Back 40

Periods of inflation

Front 41

In 1997, GDP was equal to $5,463 billion while the M1 money supply was $826 billion. What was the velocity of money?

Back 41

6.6

Front 42

An analysis of countries experiencing rapid rates of inflation indicates that inflation is generally caused by:

Back 42

Excessive growth in the money supply.

Front 43

Carrie withdraws money from the bank everyday rather than once a week. What is this an example of?

Back 43

The "shoeleather" costs of inflation.

Front 44

Shows the amount of money that individuals and businesses wish to hold at various price levels:

Back 44

The demand curve for money

Front 45

The theoretical separation of nominal and real variables:

Back 45

classical dichotomy

Front 46

The one-for-one adjustment of the nominal interest rate to the inflation rate:

Back 46

Fisher effect

Front 47

The costs of changing prices:

Back 47

menu costs

Front 48

Asserts that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate:

Back 48

quantity theory of money

Front 49

The revenue the government raises by creating money:

Back 49

inflation tax

Front 50

Variables measured in monetary units:

Back 50

nominal variables

Front 51

The equation M x V = P x Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy’s output of goods and services:

Back 51

quantity equation

Front 52

The resources that are wasted when inflation encourages people to reduce their money holdings:

Back 52

shoeleather costs

Front 53

Variables measured in physical units:

Back 53

real variables

Front 54

The proposition that changes in the money supply do not affect real variables:

Back 54

monetary neutrality

Front 55

When the Fed adds more money to the economy, the Money Supply curve shifts to the ________, causing the equilibrium price level to ________.

Back 55

right, increase

Front 56

If the Fed increased the supply of money, and velocity remains unchanged, according to the quantity equation:

Back 56

P x Y must increase

Front 57

When inflation turns out to be higher than expected, borrowers will be ________ off, and lenders will be ________ off.

Back 57

better, worse