Review Chapter 31

When prices are falling, economists say that there is

• disinflation

• deflation

• a contraction

• an inverted inflation

The term hyperinflation refers to

• the spread of inflation from one country to others.

• a decrease in the inflation rate.

• a period of very high inflation.

• inflation accompanied by a recession.

The value of money falls as the price level

• rises, because the number of dollars needed to buy a representative basket of goods rises

• rises, because the number of dollars needed to buy a representative basket of goods falls.

• falls, because the number of dollars needed to buy a representative basket of goods rises.

• falls, because the number of dollars needed to buy a representative basket of goods falls.

If  P denotes the price of goods and services measured in terms of money, then

• 1/P represents the value of money measured in terms of goods and services

• P can be regarded as the “overall price level.”

• an increase in the value of money is associated with a decrease in P.

• All of the above are correct.

With the value of money on the vertical axis, the money supply curve is

• upward-sloping.

• downward-sloping.

• horizontal.

• vertical.

If M = 3,000, P = 2, and Y = 12,000, what is velocity?

• 1/2

• 2

• 4

• 8

If velocity = 3.5, the quantity of money = 15,000, and the price level = 1.2, then the real value of output is

• 3,571.43

• 4,285.71

• 5,142.86

• 43,750.00.

Other things the same, an increase in velocity means that

• the rate at which money changes hands falls, so the price level rises.

• the rate at which money changes hands falls, so the price level falls.

• the rate at which money changes hands rises, so the price level rises.

• the rate at which money changes hands rises, so the price level falls

If the nominal interest rate is 8 percent and expected inflation is 3.5 percent, then what is the real interest rate?

• 11.5 percent

• 7.5 percent

• 4.5 percent

• 2.5 percent

The supply of money is determined by

• the price level.

• the Treasury and Congressional Budget Office

• the Central Bank.

• the demand for money