Ch 17 Money Growth and Inflation

Question 1

this theory explains how the price level is determined and why it might change over time

Answer 1

quantity theory of money

Question 2

formula for quantity theory of money

Answer 2

MV = PY

both sides represent nominal GDP

Question 3

The separation of real and nominal variables is called the

Answer 3

classical dichotomy

Question 4

Formula for nominal interest rate

Answer 4

Real interest rate + inflation

Question 5

Formula for real interest rate

Answer 5

nominal interest rate - inflation

Question 6

the cost of time and effort that people expend by holding cash in order to reduce the inflation tax that they pay on cash holdings when there is high inflation

Answer 6

shoeleather costs

Question 7

who stated that inflation is always and everywhere a monetary phenomenon?

Answer 7

milton friedman

Question 8

the resistance of market prices to change quickly despite changes in the broad economy that suggest a different price is optimal

Answer 8

price stickiness

Question 9

economic term used to describe the cost incurred by firms in order to change their prices

Answer 9

menu costs

Question 10

as the price level falls, the value of money ________

Answer 10

rises

Question 11

if price level is 0.80, what is the value of money

Answer 11

1/0.80

Question 12

money neutrality is the proposition that a change in the money supply [affects/does not affects] nominal variables and [affect/does not affect] real variables

Answer 12

affects; does not affect

Question 13

the one-for-one adjustment of the nominal interest rate to the inflation rate

Answer 13

Fisher Effect