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WorksheetsG12: Quantity Theory of Money and Inflation
Total questions: 13
Worksheet time: 11mins
The quantity theory of money is expressed by the identity equation:
MV / PY
MV = Y
M = PYV
MV = PY
Both sides of the quantity theory of money identity represent ____________.
Nominal GDP
Inflation
The Money Supply
Real GDP
In the quantity theory of money, V represents:
The velocity of production
The value of a dollar
The value of a good
The velocity of a dollar
In the quantity theory of money, P and Y represent the price and quantity of
all finished goods and services sold in an economy
all financial services sold in an economy
all durable capital (tractors, manufacturing equipment) purchased in the economy
all raw materials and natural resources sold in an economy
Nominal GDP in terms of _______ is represented by how much money there is and how many times it is spent, while Nominal GDP in terms of ________ is represented by all goods and services and their prices
domestic production & international production
buyers & seller
sellers & buyer
imports & exports
A change in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?
M, the money supply
Y, the real GDP
V, velocity of money
None of the above
The growth rate in prices is also called:
inflation
escalation
GDP spread
the velocity of prices
The phrase that “money is neutral in the long run,” means:
after enough time, money is worthless
if the money supply triples, prices will triple
currency exchange rates are always fluctuating
money is just a middle-man for the barter system
The velocity of money is affected by which of the following?
How quickly the treasury prints new money
If workers are paid weekly, bi-weekly, or monthly
If a consumer makes purchases with large bills or smaller bills
If a consumer uses a payment plan to purchase something or pays outright
Which of the following situations is an example of inflation occurring in a two-good economy?
The price of apples is about 2% higher than it was five years ago, while the price of pears fell by about 2% over the same time period.
The price of apples and the price of pears both increased by about 2% in the last five years.
The price of apples and the price of pears have remained the same over the past 5 years, but wages for factory workers have increased since then.
The price of apples and the price of pears both decreased about 5% in the past 5 years.
The Consumer Price Index (CPI) is a weighted average of the prices of:
thousands of goods and services bought by US consumers.
the top ten goods and services bought by US consumers.
only durable goods bought by US consumers.
hundreds of grocery items bought by US consumers.
The inflation rate is measured as the percentage change in the index over a time period. What variable should be plugged in for the denominator?
?(P2−P1)
P2
π
P1
x2
If the CPI is 93 in 2014 and 97 in 2015, calculate the rate of inflation from 2014 to 2015.
4%
4.3%
4.12%
5.2%
