Inflation

Inflation increases

• All prices, including wages.

• All prices, except wages.

• Prices of input goods only.

• Prices of finished goods only.

Inflation interferes with the price system in which costly way?

• Inflation raises all prices so that consumers must pay more than they make.

• Inflation distorts price signals, making it difficult for consumers to tell if the price increase is due to scarcity or inflation, and react appropriately.

• Money illusion is the phrase used to describe when people mistake:

• Inflation wastes buyer resources as they engage in more searching for lower prices

Money illusion is the phrase used to describe when people mistake:

• Changes in prices with changes in costs.

• Changes in prices with changes in quality

• Changes in nominal prices with changes in wages

• Changes in nominal prices with changes in real prices

Which type of inflation is described as worrisome and costly?

• Low and steady

• High and steady

• High and volatile

• Low and volatile

A change in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?

• Y, the real GDP

• V, velocity of money

• M, the money supply

• None of the above

The growth rate in prices is also called:

• the velocity of prices

• GDP spread

• escalation

• inflation

The phrase that “money is neutral in the long run,” means:

• if the money supply triples, prices will triple

• after enough time, money is worthless

• 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 a consumer makes purchases with large bills or smaller bills

• If workers are paid weekly, bi-weekly, or monthly

• If a consumer uses a payment plan to purchase something or pays outright

A change in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?

• Y, the real GDP.
• V, velocity of money.
• M, the money supply.
• None of the above.

The velocity of money is affected by which of the following?

• How quickly the treasury prints new money
• If a consumer makes purchases with large bills or smaller bills
• If workers are paid weekly, bi-weekly, or monthly
• If a consumer uses a payment plan to purchase something or pays outright