Money growth and inflation

Which two of the following would still be ‘costs’ of inflation even when inflation rates are perfectly anticipated by markets?

a) Shoe leather costs

b) Losses to borrowers via higher rates of inflation

c) Menu costs

d) Lower levels of unemployment

• a and c

• b and d

• c and d

• a and b

Menu costs in relation to inflation refer to:

• Costs of finding better rates of return

• Costs of altering price lists

• Costs of money increasing its value

• Costs of revaluing the currency

Inflation can be measured by the

• change in the Customer Price Index

• percentage change in the Customer Price Index

• percentage change in the price of a specific commodity

• change in the price of a specific commodity

What is the fisher effect?

• The nominal interest rate changes as the inflation rate changes

• Real interest rates change as inflation rates change

• Changes in the amount of money

• Changes in monetary value

Which of the following ideas is the quantity theory of money used to demonstrate?

• Real output never changes

• Changes in the velocity of money affect real variables

• Deflation occurs when the money supply increases faster than real output increase

• Inflation occurs because the money supply increases faster than real output increases

Norminal GDP is $100 million and the money supply is $25 million

According to the quantity theory of money, What is the velocity of money?

• 75

• $123 million

• 0.25

• 4

Which of the following is the proposition that changes in the money supply do not affect real variables?

• Velocity of money

• Quantity theory of money

• Monetary neutrality

• Shoe leather costs

What is the primary cause of deflation according to monetarist theory?

• A rapidly changing velocity of money

• The money supply increase too rapidly for a long time

• The money supply decreases faster than real output decreases

• Any decrease in the money supply

Which of the following statement about The Fisher Effect is wrong?

• A one-to-one adjustment of the nominal interest rate to the inflation rate

• Inflation is the growth in the quantity of money

• When the rate of inflation rises, the nominal interest rate rises by the same amount

• The real interest rate stays the same

In the Quantity Equation V=(PxY)/M, V is stand for

• Price level

• Velocity

• Quantity of output

• Quantity of money