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macroeconomics > who/what causes inflation > Flashcards

who/what causes inflation Flashcards

1
Q

which of the QE was inflationary

A

QE4

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2
Q

inflation impacts prices how

A

prices go up

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3
Q

two theories of inflation

A

-quantiative theory of money (QTOM)
-fiscal theory of price level

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4
Q

quantiative theory of money

A

1:1 for growth of money and supply
-printed money = inflation because of demand going up

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5
Q

fiscal theory of price level

A

fiscal expansions causes inflation

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6
Q

are QTOM and FTPL mutually exlcusive

A

no

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7
Q

what does milton friedman say about inflation

A

not suitable for real time decision making

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8
Q

is supplementary interest normal

A

no (ie covid)

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9
Q

total interest is determine by

A

debt

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10
Q

according to QTOM does fed in fact control the money supply

A

no b/c banks can make money
-bc fed creates and causes inflation

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11
Q

QTOM velocity is shown how

A

how often currency changes hands (total economic activity)

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12
Q

is QTOM long or short run

A

fails in short run but not long run (factors of production lag)

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13
Q

is money velocity constant over course of time

A

yes

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14
Q

growth rate of money supply correlates with

A

interest rate (so by QTOM fed is responsible)

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15
Q

FTPL assertion

A

inflation is proportional to rate of growth of national debt

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16
Q

since congress chooses the growth rate of national debt it effectively causes what

A

inflation b/c congress chooses groiwth rate of debt they effectively puase/control inflation

17
Q

does congress in fact control national debt

A

yes/no, some parts of budget are set or discretionary (can choose)

18
Q

will gov at some point settle debt on balance sheet

A

yes

19
Q

according to FTPL as a countrys debt rises, two extreme evenys might occur which are

A

1)ppl trust govnt will generate future surpluses to repay inc level of debt, so they are happy to hold it (price level is unchanged)
2)ppl do not trust govnt will generate nough eusplrus to repay new inc level of debt so they trade it for goods + services (price level rises proportionally)

20
Q

FTPL asserts what

A

1) govnt debt is money and 2) its value dervices from the present value of future tax revenues

21
Q

FTPL problem

A

think gov wont be able to pay so you ant money back now, spend it, price levels rise (inflation)

22
Q

why might people still want to get rid of their money if not for fear of default

A

because they fear that the gov will inflate the debt away.

23
Q

issues with QTOM

A

the fed does not have control of the supply of money used in real economy (currency in circulation + demand deposiys)

24
Q

issues with FTPL

A

-govnt debt is not money
-so long as fed is independent, congress cnanot just inflate away its debt

25
Q

how to ATOM and FTPL not mutually exlcusive

A

both think that fed congress and treasury inpact money supply

26
Q

two types of money that can be inflationary

A

currency and deposits

27
Q

why were QE1-3 not inflaitonary

A

b/c they were only dealing with banking money
-money to banks to pay off their debt

28
Q

why was QE4 inflationary

A

b/c stimulus checks that put money into real world

29
Q

what type of money can fed make

A

banking money

30
Q

when teh govnt spends what is created

A

new deposits

31
Q

fiscal deficits lead to

A

a net creation of deposits

32
Q

modern monetary theory

A

arent going to be actually able to pay back all debt (nor do we want to) so we will infinitely print money

33
Q

the gov can and should spend uninhibitedly b/c… (by modern money theory)

A

debt and factors

34
Q

modern monetary theory: debt

A

can be paid for via monetary expansion -> no default risk

35
Q

modern monetary theory: factors

A

are slam or demand for money is unlimited -> no inflation risk

macroeconomics (26 decks)

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