-Hyperinflations occur when the government runs a large budget ________, which the central bank
finances with a substantial monetary ________.
a. deficit, contraction
b. deficit, expansion
c. surplus, contraction
d. surplus, expansion
-According to the quantity theory of money and the Fisher effect, if the central bank increases the
rate of money growth,
a. inflation and the nominal interest rate both increase.
b. inflation and the real interest rate both increase.
c. the nominal interest rate and the real interest rate both increase.
d. inflation, the real interest rate, and the nominal interest rate all increase.
- If an economy always has inflation of 10 percent per year, which of the following costs of inflation
will it NOT suffer?
a. Shoe leather costs from reduced holdings of money.
b. Menu costs from more frequent price adjustment.
c. Distortions from the taxation of nominal capital gains.
d. Arbitrary redistributions between debtors and creditors.
-Hyperinflations occur when the government runs a large budget ________, which the central bank
finances with a substantial monetary ________.
a. deficit, contraction
b. deficit, expansion
c. surplus, contraction
d. surplus, expansion
-According to the quantity theory of money and the Fisher effect, if the central bank increases the
rate of money growth,
a. inflation and the nominal interest rate both increase.
b. inflation and the real interest rate both increase.
c. the nominal interest rate and the real interest rate both increase.
d. inflation, the real interest rate, and the nominal interest rate all increase.
- If an economy always has inflation of 10 percent per year, which of the following costs of inflation
will it NOT suffer?
a. Shoe leather costs from reduced holdings of money.
b. Menu costs from more frequent price adjustment.
c. Distortions from the taxation of nominal capital gains.
d. Arbitrary redistributions between debtors and creditors.
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23. | Shoe-leather costs refer to the costs of: | ||||||||
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24. | Unit-of-account costs of inflation are the: | ||||||||
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25. | Menu costs of inflation are the: | ||||||||
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26. | Which statement is true? | ||||||||
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27. | Suppose that the nominal rate of interest is 7 percent and the inflation rate is 3 percent. The real rate of interest is equal to: | ||||||||
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28. | You have gone to the bank to borrow money for one year. The nominal annual interest rate is 7.5 percent. The real rate of interest is 4 percent. (Hint: what is the expected inflation rate?) Over the course of the year, overall prices increased by 3 percent. (Hint: What is the actual inflation rate?) This rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate of inflation. | ||||||||
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