Chapter 10

Question 1

If the price level increased from 130 to 150, then what was the inflation rate?

Answer 1

15.4%

Question 2

When the Consumer Price Index decreases from 140 to 125

Answer 2

less money is needed to buy the same amount of goods, so the value of money rises.

Question 3

The economy of Umrica uses gold as its money. If the government discovers a large reserve of gold on their land the

Answer 3

supply of money increases, the value of money falls, and prices rise.

Question 4

When the money supply curve shifts from MS1 to MS2,

Answer 4

The equilibrium value of money decreases

Question 5

Last year, Jane spent all of her income to purchase 200 units of corn at $5 per unit. This year, she spent all of her income to purchase 180 units of corn at $6 per unit.

Answer 5

Jane’s nominal income increased this year, but her real income decreased.

Question 6

If velocity = 8, the quantity of money = 2,300, and the price level = 2.25, then the real value of output is approximately

Answer 6

8,178.

Question 7

If Y and V are constant and M doubles, the quantity equation implies that the price level

Answer 7

doubles

Question 8

Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods. The nominal interest rate was

Answer 8

6 percent and the inflation rate was 2 percent.