Week 3 Flashcards
If the price level is 200 in year 1 and 210 in year 2, annual inflation is
5%
The Fed’s preferred price index for measuring inflation is the
Personal Consumption Expenditures Deflator
If in the year 2030, US Gross Domestic Product is $40 trillion (2030 dollars), and the GDP deflator then is 400 (2020 = 100), what is real 2030 GDP (in 2020 dollars)?
$10 Trillion
Since 1983, annual US inflation as measured by the CPI-U has averaged
about 0.40% more than PCE inflation
Suppose the CPI-U is 300 in 2020 and 600 in 2030, both relative to 100 in 1982-4. If Smith’s nominal income in 2030 is $90,000, what is her real 2030 income, in 2020 dollars?
$45,000
Which price index behaves least like the PCE deflator?
The PPI for Finished Consumer Goods
“Core” CPI-U and PCE inflation excludes
D. Food and Energy
Real GDP growth during 1950-2019 averaged about
3%
Suppose that real money demand is $1Trillion (2020 dollars), and that the nominal money supply in 2030 is $5 Trillion. According to the Quantity Theory of Money, what will be the 2030 price level (2020 = 100)?
500
Holding constant the average length of time money is held between being received and spent, an increase in the volume of real transactions conducted with money will tend to
Increase the demand for real money balances
Holding constant the volume of real transactions conducted with money, an increase in the average time money is held between being received and spent will tend to
Increase the demand for real money balances
According to Walras’ Law,
D. An excess supply of money leads to an excess demand for goods
The “Ripple Effect” of inflations tends to
Transfer purchasing power from those who sell goods and services whose prices go up last to those who sell goods and services whose prices go up first
Price ceilings tend to cause
the demand for affected goods to exceed the supply.
Price floors tend to cause
the supply of affected goods to exceed the demand.
