Econ 30
Suppose that, because of inflation, people in Brazil economize on currency and go to the bank each day to withdraw their daily currency needs. This is an example of
shoesleather cost
If the price level doubles,
. the value of money has been cut by half.
Suppose the nominal interest rate is 7 per cent while the money supply is growing at a rate of 5 per cent per year. If the government increases the growth rate of the money supply from 5 per cent to 9 per cent, the Fisher effect suggests that, in the long run, the nominal interest rate should become
11 per cent.
If the real interest rate is 4 per cent, the inflation rate is 6 per cent, and the tax rate is 20 per cent, what is the after tax real interest rate?
2 %
If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is
3 percent
If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is
3%
Which of the following costs of inflation does not occur when inflation is constant and predictable?
Arbitrary redistributions of wealth.
If money is neutral,
a change in the money supply only affects nominal variables such as prices and wages
If money is neutral,
a change in the money supply only affects nominal variables such as prices and wages.
The quantity theory of money concludes that an increase in the money supply causes
a proportional increase in prices.
Which of the following statements is true about a situation where real incomes are rising at 3 per cent per year.
all correct
If the nominal interest rate is 7 per cent and the inflation rate is 5 per cent, the real interest rate is 12 per cent.
false
Inflation tends to stimulate saving because it raises the after tax real return to saving.
false
Monetary neutrality means that a change in the money supply doesn't cause a change in anything at all.
false
Countries that employ an inflation tax do so because
government expenditures are high and the government has inadequate tax collections and difficulty borrowing.
In the long run, inflation is caused by
government prints to much money
When prices rise at an extraordinarily fast rate, it is called
hyperinflation
an inflation tax
is tax on people who hold money
If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by
less than 5 %
In the long run, the demand for money is most dependent upon
level of prices
Suppose that, because of inflation, a business in Russia must calculate, print, and mail a new price list to its customers each month. This is an example of
menu costs
The quantity equation states that
money 3 velocity = price level 3 real output.
The velocity of money is
the rate at which money exchanges hands
An example of a real variable is
the ratio of the value of wages to the price of soda.
Inflation reduces the relative price of goods whose prices have been temporarily held constant to avoid the costs associated with changing prices.
true
If the price level doubles,
value of money gets cut in half.