question
inflation
answer
an increase in the average level of prices over time
-decline in the value or "purchasing power" of currency
-doesn't decrease amt. of purchases an individual can make--- it increases the amt. of dollars needed to purchase certain items
-decline in the value or "purchasing power" of currency
-doesn't decrease amt. of purchases an individual can make--- it increases the amt. of dollars needed to purchase certain items
question
what is a price index?
answer
a number that measures the average level of prices in a given period relative to the average level of prices during some period of time
question
2 types of price indexes:
answer
1)explicit price index
ex- consumer price index (cpi)
2)implicit price index
ex-GDP deflator which is P=(nominal GDP/real GDP)x100
ex- consumer price index (cpi)
2)implicit price index
ex-GDP deflator which is P=(nominal GDP/real GDP)x100
question
explicit price index
answer
uses explicit data on prices of a set of typical consumer goods and services in different years(CPI)
question
implicit price index
answer
GDP deflator includes all goods and services produced in the economy & is implied by the difference between nominal and real GDP
question
"deflate" nominal values to real values
answer
Value in this year's dollars=value in past year's dollars x (CPI this year/ CPI past year)
question
quantity theory of money
answer
M + v= P + Yr
question
The quantity theory of money predicts that the main cause of inflation is increases in:
answer
the money supply.
question
Money illusion is:
answer
mistaking changes in nominal prices for changes in real prices.
question
When the expected rate of inflation is higher than the actual rate of inflation, wealth is:
answer
redistributed from borrowers to lenders.
question
The primary reason we think of inflation as bad even when wages rise with it is that it:
answer
distorts the information delivered by prices
question
Which of the following is a problem with deflation?
answer
It raises the real cost of debt repayment.
question
Debt monetization means that a government pays off its debt by:
answer
increasing the money supply.
question
expected inflation<actual inflation
answer
benefits borrowers
lenders ---> borrowers
lenders ---> borrowers
question
expected inflation> actual inflation
answer
benefits lenders
question
expected inflation=actual inflation
answer
no redistribuition
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
