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MacroEcon ECN 320 > Ch 5.2 > Flashcards

Flashcards in Ch 5.2 Deck (16)
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1
Q

If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate must:

A

increase by 1 percent.

2
Q

Between 1880 and 1896, the price level in the United States fell 23 percent. This movement was ______ for bankers of the Northeast and ______ for farmers of the South and West.

A

good; bad

3
Q

According to the classical theory of money, reducing inflation will not make workers richer because firms will increase product prices ______ each year and give workers ______ raises.

A

less; smaller

4
Q

The classical dichotomy:

A

holds when one can determine the values of real variables without knowing the values of nominal variables or the size of the money supply.

5
Q

The inconvenience associated with reducing money holdings to avoid the inflation tax is called:

A

shoeleather costs.

6
Q

If inflation is 6 percent and a worker receives a 4 percent nominal wage increase, then the worker’s real wage:

A

Decreased by 2 percent

7
Q

Survey evidence indicates that economists worry ______ the general public does about prices increasing more rapidly than their incomes.

A

Less than

8
Q

When a person purchases a 90-day Treasury bill, he or she cannot know the:

A

Ex Post real interest rate

9
Q

Percentage change in P is approximately equal to the percentage change in:

A

M minus percentage change in Y plus percentage change in velocity.

10
Q

If the real interest rate and real national income are constant, according to the quantity theory and the Fisher effect, a 1 percent increase in money growth will lead to rises in:

A

inflation of 1 percent and the nominal interest rate of 1 percent.

11
Q

The ex post real interest rate will be greater than the ex ante real interest rate when the:

A

actual rate of inflation is less than the expected rate of inflation.

12
Q

It would be most precise to say that the Fisher effect predicts that the nominal interest rate will move one-for-one with the:

A

expected inflation rate.

13
Q

If nominal wages cannot be cut, then the only way to reduce real wages is by:

A

inflation.

14
Q

The opportunity cost of holding money is the:

A

nominal interest rate.

15
Q

If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP willl be approximately ______ percent.

A

3

16
Q

Variables expressed in terms of money are called ______ variables.

A

nominal