Chapter 11

Question 1

Quantity theory of money

Answer 1

the quantity of money available determines the price level. growth rate in the q of $ available determines the inflation rate

Question 2

how does the quantity theory of money affect real variables?

Answer 2

in the short run

Question 3

how does the quantity theory of money affect nominal variables?

Answer 3

in the long run

Question 4

The quantity equation

Answer 4

MV = PQ, relates the money supply (M) to the velocity of money (V) = the price level (P) to the quantity of goods and services produced in an economy (Q)

Question 5

Fisher effect

Answer 5

one for one adjustment of nominal interest rate inflation

Question 6

inflation puts cost on the economy

Answer 6

1. shoe leather costs, 2. menu costs, 3. relative price variability, 4. misallocation of resources, 5. redistribution of wealth, 6. confusion and inconvenience

Question 7

private saving

Answer 7

y - t - c

Question 8

public saving

Answer 8

t - g

Question 9

gdp

Answer 9

y = c + I + g + nx

Question 10

cpi

Answer 10

price basket of g and s in current yr / price basket in base yr

Question 11

gdp deflator

Answer 11

nominal / real

Question 12

tangible

Answer 12

food

Question 13

intangible

Answer 13

haircut

Question 14

shift demand curve

Answer 14

IPTEB

Question 15

shift supply curve

Answer 15

ITES

Question 16

inferior good

Answer 16

demand drops when income rises KD

Question 17

positive

Answer 17

fact

Question 18

normative

Answer 18

opinion