Exam 8: The Price Level and Inflation

Consider the equation % $\triangle$ M + % $\triangle$ V $\approx$ % $\triangle$ P + % $\triangle$ Y. If the velocity of money does not change % $\triangle$ V = 0), and the change in real GDP exactly keeps pace with the change in the money supply % $\triangle$ M = % $\triangle$ Y), what will happen to the price level P)?

In some nations the only currency is gold. Someone proposes the argument that if gold were the only currency, there could not be inflation. Would you agree or disagree with this statement? Explain.

According to the textbook, the top-grossing movie of all time adjusted for inflation) is

If the value of the consumer price index CPI) in 2013 was 135 and the value of the CPI in 2012 was 117, we could correctly say that the

By definition, the velocity of money is the

In Bovania, milk constitutes 56 percent of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 4 percent and the prices of all other goods fall by 10 percent. Based on the information given, we can definitely say

Menu costs of inflation

Refer to the following figure to answer the next four questions: -As presented in the figure, one could correctly state that

If a Hershey's chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey's chocolate bar cost $0.05 in 1955 when the price index was 27, then

The percentage change in any economic variable, including the consumer price index CPI), is measured by which equation?

Explain the distorting effect of inflation on the payment of capital gains taxes.

If the consumer price index CPI) was 100 in the period of 1982-1984, then

The wealth-redistribution effect of inflation requires that the inflation be

Deflation

If the goods producers buy change dramatically between years, then

The distinction between price confusion problems and menu costs is that

From 1960 until 2012, the long-run average rate of inflation in the United States was

Give two reasons why governments inflate their money supplies by printing money, and explain the downside associated with each reason.

What does the fact that most countries' economies lie near the straight, slanting line in the graph below indicate?

The long-run inflation rate in the United States is about