Exam 12: Inflation and the Quantity Theory of Money

If the price of gasoline increased from $2.50 per gallon in 2006 to $3.50 per gallon in 2010, during which time the CPI increased from 203.1 to 220.2, then we can conclude that the real price of gasoline declined from 2006 to 2010.

The quantity theory of money predicts that the main cause of inflation is increases in:

Changes in money velocity and GDP are the main determinants of the inflation rate.

Suppose the nominal GDP of a country is $500 billion. If the velocity of money in the country is 10, then the country's money supply will equal:

Government debt monetization generally leads to inflation.

According to the CPI, since 1950 the average U.S. inflation rate has been:

Which price index measures the average price received by suppliers?

The quantity theory of money shows the general relationship between inflation, money, real output, and wages.

Suppose the nominal interest rate is 4% and the inflation rate is 5%. The real interest rate is:

According to the quantity theory, which of the following could cause the price level to decrease?

The bundle of goods used to calculate the consumer price index remains constant over time.

From 2002 to 2007, Zimbabwe experienced average annual inflation of:

If you had to predict the U.S. inflation rate for next year and decided that a good way to make that prediction would be to simply use the average inflation rate over the past 10 years, what would be your prediction for U.S. inflation next year?

The consumer price index measures the prices of:

Inflation is:

Inflation has no economic costs as long as it is fully expected.

When an economy experiences volatile and unpredictable hyperinflation:

As a result of the changing variety and quality of goods that the typical consumer purchases each year, many economists argue that the CPI might:

Use the following to answer questions: Table: Anticipating Inflation Year Predicted Inflation Rate Actual Inflation Rate 2000 3\% 3\% 2001 3\% 2\% 2002 7\% 9\% 2003 5\% 4\% 2004 4\% 7\% -(Table: Anticipating Inflation) Using the inflation data in the table above, assume that all loan contracts have fixed nominal interest rates of 10% and mature after 1 year. Which year did borrowers gain relative to lenders?

Inflation is best defined as an increase in: