Week 5- Monetary growth and inflation problem set

Question 1

Printing money to finance gov’t expenditures___

Answer 1

imposes a tax on everyone who holds money.

Question 2

As Inflation falls, people make___

Answer 2

less trip to the bank and firms make less frequent price changes.

Question 3

Inflation measured by___

Answer 3

percentage change in Consumer Price Index.

Question 4

As Inflation rises, people make___

Answer 4

more frequent trip to the bank and firms make more frequent price changes.

Question 5

Money demand refers to___

Answer 5

how much wealth people want to hold in liquid form

Question 6

IF value of money on vertical axis, money supply is___

Answer 6

vertical.

Question 7

Interest rates adjusted for effects of inflation are___

inflation is a___

Answer 7

real variables.

nominal variable.

Question 8

IF CPI rises, number of dollars needed to buy a representative basket of goods___

Answer 8

increases, and so the value of money falls.

Question 9

When prices are falling, there’s___

Answer 9

deflation.

Question 10

When price level rises, number of dollars needed to buy a representative basket of goods___

Answer 10

increases, and so the value of money falls.

Question 11

When money market is drawn w/ the value of money on vertical axis, money demand___

Answer 11

slopes downward and money supply is vertical.

Question 12

Over the past 70 years, prices in the US have___

Answer 12

risen about 4% per year.

Question 13

In the US, people required to pay taxes on___

Answer 13

nominal interest earnings, irrespective of their real interest earnings.

Question 14

Market economies rely on relative prices to___

Answer 14

allocate scarce resources.

Question 15

Hyperinflation refers to___

Answer 15

a period of very high inflation.