Learning: Chapter 16: The Dynamics of Inflation and Unemployment

Velocity is defined as:

(P × Y)/M.

If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.

-2 percent

Hyperinflation exists when the inflation rate exceeds per month.

50%

Which of these is the most desirable measure to stop hyperinflation?

Eliminate the government deficit

The equation of exchange is:

M x V = P x Q

The economist that is considered the founder of monetarism is __________.

Milton Friedman

The inverse relationship between unemployment and inflation is known as the;

Phillips curve.

is the term given to the government revenue raised from printing money and minting coins and overall money creation.

Seignorage

is the confusion between nominal and real values.

The money illusion

maintains that the public forms reasonable accurate forecasts about inflation and economic activity.

The rational expectations theory

Nominal wages are wages expressed in dollars.

current

In the short run, a policy of easy money leads to:

faster money growth, lower interest rates, and higher output

In the long run, the rate of inflation is determined by the __________.

growth of the money supply

According to rational expectations theory, any announced policy change will:

have no impact on output.

The links the money supply, velocity, and the nominal GDP.

quantity equation

In the past 30 years there have been cases of hyperinflation.

several

If the Federal Reserve increases the money supply at 5% a year, in the long run there will be __________.

something less than 5% annual inflation

Is the confusion between nominal and real values

the money illusion