A country has 4 million units of goods and services within itself. While these goods and services remain constant, the government printed money and increased the amount of money in circulation from 10 million units to 12 million units. Under these conditions: a) Calculate the amount of increase in prices. b) Calculate the rate of decrease in the purchasing power of money

A country has 4 million units of goods and services within itself. While these goods and services remain constant, the government printed money and increased the amount of money in circulation from 10 million units to 12 million units. Under these conditions: a) Calculate the amount of increase in prices. b) Calculate the rate of decrease in the purchasing power of money

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 16SQ

See similar textbooks

Similar questions

Suppose there is an increase in money supply, as a result interest rates will Multiple Choice rise and the quantity of money will increases. fall and the quantity of money will remain constant. rise and the quantity of money will decrease. fall and the quantity of money will increases.
When nominal interest rates on financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________.
The following table shows a money demand schedule, which is the quantity of money demanded at various price levels (PP). Fill in the Value of Money column in the following table. Price Level (P) Value of Money (1/P) Quantity of Money Demanded 1.00 1.5 1.33 2.0 2.00 3.5 4.00 7.0 Now consider the relationship between the price level and the quantity of money that people demand. The lower the price level, the (a. more, b. less) money the typical transaction requires, and the (a. more, b. less) money people will wish to hold in the form of currency or demand deposits. Assume that the Fed initially fixes the quantity of money supplied at $3.5 billion. Use the orange line (square symbol) to plot the initial money supply (MS1) set by the Fed. Then, referring to the previous table, use the blue connected points (circle symbol) to graph the money demand curve. (Graph in image) According to your graph, the equilibrium value of…
At an equilibrium purchasing power of money A. People will stop working because they do not need any additional cash balances B. Overall prices will have no tender 2 change C. People have extra money to spend D. The demand for money is unlimited
If the price level doubled and someone wanted to maintain the same level of purchasing power, the nominal quantity of money demanded: A) must decrease. B) also must double. C) must increase by 50%. D) must stay the same.
In the long run, technological progress Answer and increases in the money supply both make the price level rise. and increases in the money supply both make the price level fall. makes the price level rise, while increases in the money supply make prices fall. makes the price level fall, while increases in the money supply make prices rise. Question 23 If the price level rises above what was expected and nominal wages are fixed, then Answer production becomes less profitable so firms will hire fewer workers. production becomes less profitable so firms will hire more workers. production becomes more profitable so firms will hire fewer workers. production become more profitable so firms will hire more workers.
total demand for money (Click for List) the amount of money people want to hold as a store of value, is the sum of the transactions demand for money and the asset demand for money. M2++ raises the interested rate
When the money market is depicted in a diagram with the value of money on the vertical axis, which statement best describes the long-run effects of an increase in money supply? a)The price level decreases, but the quantity of money demanded increases b)The price level and the quantity of money demanded increases c)The price level and the quantity of money demanded decreases d)The price level increases, but the quantity of money demanded decreases
Which of the following statements is false A. Money is not a comsumption or a capital good B. An increase in the money supply does not confer a general benefit on society C. Economic theory cannot tell us generally which groups benefit and which groups are injured by inflation D. Economic theory cannot tell us the supply of money that is proper for an economy to have
Equilibrium in the money market occurs when Select one: a. the transactions demand for money equals the precautionary demand for money. b. the quantity of money demanded is more than the quantity of money supplied in the economy. c. the quantity of money demanded equals the quantity of money supplied in the economy. d. the quantity of money demanded is less than the quantity of money supplied in the economy.
Mcq question give fast answer Transactions demand for currency reflects which of the following?: Mark all that apply Demand to hold currency that will not be spent for the period in question Demand for currency that will to be spent during the period in question overall demand for currency demand to hold currency on deposit at a bank
Given the above, how will price level change if the quantity of money in circulation is increased from 50,000 to 100,000?