Macrotheory ch. 4/5

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If nominal wages cannot be cut, then the only way to reduce real wages is by:

adjustments via inflation

The rate of inflation is the:

percentage change in the overall level of prices

If the money supply is held constant, then an increase in the nominal interest rate will _____ the demand for money and _______ the price level

decrease, increase

If inflation was 6% last year and a worker received a 4% nominal wage increase last year, then the worker's real wage:

decreased by 2%

Money's liquidity refers to the ease with which:

money can be converted into goods and services

The costs of unexpected inflation, but not of expected inflation, are:

the arbitrary retribution of wealth between debtors and creditors

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

the nominal interest rate

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

3

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

People use money as a store of value when they:

hold money to transfer purchasing power into the future


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