Interm Macro Test 3 (ch05)

when a person purchases a 90-day treasury bill, he or she cannot know the:

ex post real interest rate

Based on the international data for money growth rate and inflation rate, we can conclude that the countries with high money growth tended to have _______ rates of inflation and the ones with low money growth tended to have _______ rates of inflation.

high; low

Which of the following is the variable measured in the physical unit?

real GDP

If the money supply increases by 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be _______ percent.

3

If the fed announces that it will raise the money supply in the future but does not change the money supply today,

both the nominal interest rate and the current price level will increase.

the inflation tax is paid:

by all holders of money

if the real demand for money depends on the nominal interest rate and the real income, then via the quantity theory and the fisher equation, the price level depends on:

both the current and expected future money supply.

In the case of an unanticipated increase in inflation:

creditors with an unindexed contract are hurt because they get less than they expected in real terms.

to end a hyperinflation, a country might need the fiscal reforms -- a new government trying to reduce its reliance on seigniorage by:

cut spending and establish a rational and reliable taxation system.

The definition of the transactions velocity of money is:

prices multiplied by transactions divided by money supply.

the costs of reprinting catalogs and rice lists because of inflation are called:

menu costs

The characteristic of the classical model that the money supply does not affect real variables is called:

monetary neutrality

hyperinflation ultimately are the result of excessive growth rates of the money supply; the underlying motive for the excessive money growth rates is frequently a government's:

need to generate revenue to pay for spending.

the opportunity cost of holding money is the:

nominal interest rate

in its most general formulation, the demand function for real money balances depends _______ on the level of real income and depends ______ on the nominal interest rate:

positively; negatively

the cost of unexpected inflation, but not of expected inflation, are:

the arbitrary redistribution of wealth between debtors and creditors.

The theoretical separation of real and monetary variables is called:

the classical dichotomy