Exam 5: Inflation: Its Causes, Effects, and Social Costs

If the quantity of real money balances is kY, where k is a constant, then velocity is:

The income velocity of money:

To end a hyperinflation, a government trying to reduce its reliance on seigniorage would:

Between 1880 and 1896, the price level in the United States fell 23 percent. This movement was ______ for bankers of the Northeast and ______ for farmers of the South and West.

Variables expressed in terms of money are called ______ variables.

When a person purchases a 90-day Treasury bill, he or she cannot know the:

According to the quantity theory a 5 percent increase in money growth increases inflation by ___ percent. According to the Fisher equation a 5 percent increase in the rate of inflation increases the nominal interest rate by _____.

In the classical model, according to the quantity theory and the Fisher equation, an increase in money growth increases:

The one-to-one relation between the inflation rate and the nominal interest rate, the Fisher effect, assumes that the:

Which of the following is an example of a relative price?

If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal: A)

The percentage of government revenue raised by printing money has usually accounted for:

The transactions velocity of money indicates the _____ in a given period, while the income velocity of money indicates the _____ in a given period.

The theoretical separation of real and monetary variables is called:

The general demand function for real balances depends on the level of income and the:

Consider the money demand function that takes the form (M/P)^d = kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is constant, what is the average inflation rate in this economy?

The rate of inflation is the:

Hyperinflations ultimately are the result of excessive growth rates of the money supply; the underlying motive for the excessive money growth rates is frequently a government's:

A positive relationship between nominal interest rates and inflation in the United States is obvious in:

Mary Tsai is paid $3,000 every 30 days. Her salary is deposited directly in her bank. She spends all her money at a constant rate over the 30 days and must pay cash. She can (1) withdraw all of the money at once; (2) withdraw half at once and the rest after 15 days; (3) withdraw one-third at once, one-third after 10 days, and one-third at 20 days; or (4) make any number of evenly spaced withdrawals. Each withdrawal costs her $2 in terms of time and inconvenience. For each day that Mary has a dollar in the bank, she gets .03 cents (.0003 per dollar) in interest. Thus, if she withdraws half of her money immediately and half in 15 days, she has $1,500 in the bank for 15 days and earns $6.75 interest. a. Create a table showing transacti on costs, interest eamed, and total net earnings (+) or cost ( $-$ ) associated with one, two, three, or four withdrawals per month. b. How many withdrawals per month lead to the largest net earnings? If Mary chooses this number, what will be her average amount of cash on hand over the 30 days?