Econ Recitation Quiz: 7

Betsy enters a roadside cafeteria and orders a medium-sized cappuccino and a chicken burger. She hands over $5 at the cash counter and collects the food. In this example, money serves the function of___

A medium of exchange

In theory, any object ____ could play role of fiat money

in limited supply

Suppose that the money supply increases by 10% while real GDP increases by 6%. What does the quantity theory of money predict the inflation rate will be?

4%

According to the quantity theory of money, inflation is caused by

the money supply growing faster than real GDP

Which of the following equations best approximates the growth rate of real GDP, the growth rate of nominal GDP, and the inflation rate?

Growth rate of real GDP = Growth rate of nominal GDP - inflation rate

Suppose that the money supply increases by 20%. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP?

It must increase by exactly 20%

The paper currently that is currently used in the United States is an example of ____ money.

fiat

Ryan saved $50,000 last year in his bank account so that he could buy a car this year. In this case, money served the function of a ________.

store of value

According to the quantity theory money, the inflation rate equals

the growth rate of the money supply minus the growth rate of real output

According to the quantity theory of money, when the gap between the growth rate of money supply and the growth rate of real GDP widens, the inflation rate increases.

the inflation rate increases