question
will increase today.
answer
Suppose that the Federal Reserve announces a higher money supply in the future, but does not change the money supply today. This means that, MOST likely, the price level:
question
rise over time.
answer
Suppose that an economy's rate of growth of the money supply is constant. Then, this economy experiences steady financial innovation that causes velocity to steadily rise, but has no effect on the rate of growth of gross domestic product. The inflation rate in this economy would:
question
4; 4
answer
Suppose that the amount of currency in circulation is $200 billion and the government prints $8 billion to finance its expenditures. If velocity and real GDP are constant, then the price level will rise by _____ percent and the amount of seigniorage will be _____ percent of the amount of currency in circulation.
question
the social cost of unexpected inflation only.
answer
Diane made a one year loan to John that specified a 10 percent nominal interest rate. At the end of one year, the inflation rate was 20 percent. This caused Diane to receive a negative ex post real interest rate. Diane was a victim of:
question
will increase today.
answer
Suppose that the Federal Reserve announces a higher money supply in the future, but does not change the money supply today. This means that, MOST likely, the price level:
question
steadily decrease
answer
Suppose that an economy experiences steady financial innovation that causes velocity to steadily rise, but has no effect on the rate of growth of gross domestic product. To keep the inflation rate constant in this economy, the central bank would have to _____ the rate of growth of the money supply.
question
The money demand parameter will decrease and the velocity will increase.
answer
Diane made a one year loan to John that specified a 10 percent nominal interest rate. At the end of one year, the inflation rate was 20 percent. This caused Diane to receive a negative ex post real interest rate. Diane was a victim of:
question
The money demand parameter will increase and the velocity will decrease.
answer
Suppose that automated teller machines (ATMs) become illegal. How will this affect the money demand variable, k, and the money velocity, V?
question
The money demand parameter will decrease and the velocity will increase.
answer
Suppose that automated teller machines (ATMs) have just been introduced and are gaining popularity. How will this affect the money demand variable, k, and the money velocity, V?
question
.5
answer
The amount of U.S. currency in circulation in 2014 was approximately $1,200 billion. The inflation rate in 2014, as measured by the percentage change in the Personal Consumption Expenditures (PCE) deflator was about 1.3 percent. If U.S. federal government revenue in 2014 was $3,000 billion, then seigniorage represented approximately _____ percent of revenue in 2014.
question
nominal interest rate is the sum of the real interest rate and the inflation rate.
answer
The Fisher equation shows that the:
question
reduce the velocity of money.
answer
Suppose that a country has a money demand function (M / P)d = Y / (5i). In this case, a rise in the nominal interest rate would:
question
4
answer
An economy is growing at 6 percent per year, and is experiencing a 10 percent rate of growth rate of money supply. If velocity is constant, then the inflation rate is _____ percent.
question
rise by 2.5
answer
Suppose that a country has the money demand function: (M / P)d = Y / (5i). With constant real gross domestic product of 1,000, the velocity of money would _____ if the nominal interest rate rose from 2 percent to 2.5 percent.
question
30
answer
Suppose that a country increases its money supply from $200 billion to $260 billion in one year. If velocity and the real GDP remain unchanged, then the inflation rate will be _____ percent.
question
7
answer
Suppose that a bank charges a 12 percent interest on a loan at a time when the inflation rate was expected to be 5 percent. If the actual inflation rate for the period is 8 percent, then the ex ante interest rate equals _____ percent.
question
3; borrowers to lenders
answer
Suppose that expected inflation is 5 percent and the nominal interest rate is 8 percent. If actual inflation is 2 percent lower than expected, then the ex ante real interest rate is _____ , the ex post real interest rate is 5 percent, and there is an unexpected transfer of wealth from _____.
question
fall by 20
answer
Suppose that a country has the money demand function: (M / P)d = Y / (5i). With constant real gross domestic product of 1,000, the demand for real balances would _____ if the nominal interest rate rose from 2 percent to 2.5 percent.
question
decrease
answer
A financial crisis that closes many bank branches and their respective automated teller machines (ATMs) would _____ money velocity.
question
30
answer
Suppose that a country increases its money supply from $200 billion to $260 billion in one year. If velocity and the real GDP remain unchanged, then the inflation rate will be _____ percent.
question
the nominal interest rate and the actual inflation rate
answer
The ex post real interest rate is the difference between
question
4
answer
Suppose that a bank charges a 12 percent interest on a loan at a time when the inflation rate was expected to be 5 percent. If the actual inflation rate for the period is 8 percent, then the ex post interest rate equals _____ percent
question
5 percent, and the real interest rate is 10 percent.
answer
According to the Fisher equation, the nominal interest rates will be 15 percent if the inflation rate is:
question
2
answer
Suppose that a bank charges a 7 percent interest on a loan at a time when the inflation rate was expected to be 5 percent. If the actual inflation rate for the period is 3 percent, then the ex ante interest rate equals _____ percent.
question
rise over time.
answer
Suppose that an economy's rate of growth of the money supply is constant. Then, this economy experiences steady financial innovation that causes velocity to steadily rise, but has no effect on the rate of growth of gross domestic product. The inflation rate in this economy would:
question
4
answer
An economy is growing at 6 percent per year, and is experiencing a 10 percent rate of growth rate of money supply. If velocity is constant, then the inflation rate is _____ percent.
question
steadily decrease
answer
Suppose that an economy experiences steady financial innovation that causes velocity to steadily rise, but has no effect on the rate of growth of gross domestic product. To keep the inflation rate constant in this economy, the central bank would have to _____ the rate of growth of the money supply.
question
5; lenders to borrowers
answer
Suppose that expected inflation is 3 percent and the nominal interest rate is 8 percent. If actual inflation is 2 percent higher than expected, then the ex ante real interest rate is _____, the ex post real interest rate is 3 percent, and there is an unexpected transfer of wealth from _____.
question
6
answer
In an economy with constant velocity, a real GDP growth rate of 3 percent, an ex ante real interest rate of 4 percent, and a money supply that is expected to grow at 5 percent, the nominal interest rate would be _____ percent.
question
the nominal interest rate and the expected inflation rate.
answer
The ex ante real interest rate is the difference between:
question
3; lenders to borrowers
answer
Suppose that expected inflation is 3 percent and the nominal interest rate is 8 percent. If actual inflation is 2 percent higher than expected, then the ex ante real interest rate is 5 percent, the ex post real interest rate is _____ percent, and there is an unexpected transfer of wealth from _____.
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