Chapter 30

When prices are falling, economists say that there is

• disinflation.

• deflation.

• a contraction.

• an inverted inflation.

The supply of money increases when

• the value of money increases.

• the interest rate increases.

• the Fed makes open-market purchases.

• None of the above is correct.

  
  

When economist say that a function of money is a "medium of exchange", they mean

• a way to keep wealth in a readily spendable form for future use.

• a means of payment.

• a monetary unit for measuring and comparing the relative values of goods.

• declared as legal tender by the government.

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.

The value of money RISES 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.

The velocity of money is

• the rate at which the Fed puts money into the economy.

• the same thing as the long-term growth rate of the money supply.

• the money supply divided by nominal GDP.

• the average number of times per year a dollar is spent.

As the price level decreases, the value of money

• increases, so people want to hold more of it.

• increases, so people want to hold less of it.

• decreases, so people want to hold more of it.

• 1. decreases, so people want to hold less of it.

  
  

The supply curve of money is vertical because the quantity of money supplied increases

• when the value of money increases.

• when the value of money decreases.

• only if people desire to hold more money.

• only if the central bank increases the money supply.

Hyperinflations are associated with governments printing money to finance expenditures.

• True

• False

What is the name of the rule about the time it takes to double your money?

• The Rule of 70

• The Rule of 80

• The Rule of 72

• The Rule of 75