Answered: In a hyperinflationary economy, amounts…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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Question

1. In a hyperinflationary economy, amounts not expressed to the measuring unit current at the end of the reporting period are restated by applying

a. General price index

b. Specific price index

c. Both general price index and specific price index

d. Either general price index or specific price index

2. During a period of deflation in which liability account balance remains constant, which of the following occurs?

a. A purchasing power loss if the item is a nonmonetary liability.

b. A purchasing power gain if the item is a nonmonetary liability.

c. A purchasing power loss if the item is a monetary liability.

d. A purchasing power gain if the item is a monetary liability.

3. Which would indicate that hyperinflation exists?

Sales on credit are at lower prices than cash sales.

Inflation is approaching or exceeds 20% per year.

Monetary items do not increase in value.

People prefer to keep their wealth in nonmonetary assets or a stable foreign currency.

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