Economics Flashcard

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Shoeleather costs arise when higher inflation rates induce people to

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hold less money.

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The federal funds rate is the interest rate at which banks lend reserves to each other overnight.

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interest rate at which banks lend reserves to each other overnight.

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Refer to Figure 31-2. If the relevant money-demand curve is the one labeled MD₁, then the equilibrium value of money is

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0.3 and the equilibrium price level is 3.3.

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Most economists believe the principle of monetary neutrality is

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mostly relevant to the long run.

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To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the

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quantity theory of money.

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The costs of changing price tags and price listings are known as

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menu costs.

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Inflation can be measured by the

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percentage change in the consumer price index.

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The nominal interest rate is 9 percent and the real interest rate is 6 percent. What is the inflation rate?

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3 percent

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Which of the following is consistent with the idea that high money supply growth leads to high inflation? Options: The quantity theory and data from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland. The quantity theory but not evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland. Evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland but not the quantity theory. Neither the quantity theory nor evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.

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The quantity theory and data from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.

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If Y and V are constant and M doubles, what does the quantity equation imply about the price level?

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doubles.