macroecon exam 3 ch 17
If the real interest rate is 2 percent, the inflation rate is 8 percent, and the tax rate is 20 percent, what is the after-tax real interest rate?
0 percent
Suppose the nominal interest rate is 6 percent while the money supply is growing at a rate of 3 percent per year. Assuming real output remains fixed, if the government increases the growth rate of the money supply from 3 percent to 7 percent, the Fisher effect suggests that, in the long run, the nominal interest rate should become
10 percent
If the nominal interest rate is 8 percent and the inflation rate is 4 percent, the real interest rate is
4 percent
Which of the following costs of inflation does not occur when inflation is constant and predictable?
Arbitrary redistributions of wealth
Which of the following statements about inflation is not true?
Inflation reduces people's real purchasing power because it raises the cost of the things people buy
if money is neutral
a change in the money supply only affects nominal variables such as prices and dollar wages
an inflation tax is
a tax on everyone who holds money
Countries that employ an inflation tax do so because
government expenditures are high and the government has inadequate tax collections and difficulty borrowing
substantial or persistent inflation is caused by
governments that print too much money
when prices rise at an extraordinarily high rate, it is called
hyperinflation
If the money supply grows 7 percent and real output grows 3 percent, prices should rise by
less than 7 percent
Suppose that, because of inflation, a business in Venezuela must calculate, print, and mail a new price list to its customers each week. This is an example of
menu costs
the quantity equation states that
money x velocity= price level x real output
the quantity theory of money concludes that an increase in the money supply causes a
proportional increase in prices
Suppose that, because of inflation, people in Lebanon economize on currency and go to the bank each day to withdraw their daily currency needs. This is an example of
shoeleather costs
in the long run, the demand for money is most dependent on
the level of prices
an example of a real variable is
the ratio of the price of eggs to the price of milk
velocity is
the speed at which the typical dollar circulates
if the price level doubles
the value of money has been reduced by half
If actual inflation turns out to be greater than people had expected, then
wealth was redistributed to borrowers from lenders