Macroeconomics Chapter 5 questions

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year

5

According to the classical theory of money, inflation does not make workers poorer because wages increase:

in proportion to the increase in the overall price level.

When a person purchases a 90-day Treasury bill, he or she cannot know the

ex post real interest rate.

According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the

expected inflation rate.

The ex ante real interest rate is based on _____ inflation, while the ex post real interest rate is based on _____ inflation.

expected; actual

If the real interest rate and real national income are constant, according to the quantity theory and the Fisher effect, a 1 percent increase in money growth will lead to rises in

inflation of 1 percent and the nominal interest rate of 1 percent.

The opportunity cost of holding money is the

nominal interest rate.

In the classical model, according to the quantity theory and the Fisher equation, an increase in money growth increases:

the nominal interest rate.

The quantity theory of money assumes that

velocity is constant.

Consider the money demand function that takes the form (M/P)d = Y/4i, where M is the quantity of money, P is the price level, Y is real output, and i is the nominal interest rate. What is the average velocity of money in this economy

4i

Consider the money demand function that takes the form (M/P)d = kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is constant, what is the average inflation rate in this economy?

7 Percent

Variables expressed in terms of money are called ______ variables

Nominal

Variables expressed in terms of physical units or quantities are called ______ variables

Real

According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by

The Federal Reserve

The ex post real interest rate will be greater than the ex ante real interest rate when the

actual rate of inflation is less than the expected rate of inflation.

Real money balances equal the:

amount of money expressed in terms of the quantity of goods and services it can purchase.

If the demand for money depends on the nominal interest rate, then via the quantity theory and the Fisher equation, the price level depends on

both the current and expected future money supply.

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.

If inflation is 6 percent and a worker receives a 4 percent nominal wage increase, then the worker's real wage

decreased 2 percent