Choose the correct answer of the following 1. The resources wasted when inflatio
ID: 1211264 • Letter: C
Question
Choose the correct answer of the following
1.The resources wasted when inflation encourages people to reduce their money holdings is called:
a. Menu costs.
b. Misallocation of resources.
c. Shoe leather costs.
d. Relative price variability.
2.When inflation turns out to be higher than expected, borrowers will be ________ off, and lenders will be ________ off.
a. Better, better
b. Worse, worse
c. Better, worse
d. Worse, better
3.Suppose the value of goods and services produced in an economy is $15 billion, but the total money supply is $5 billion, what is the velocity of money?
a. 15.
b. 3.
c. 10.
d. 5.
4.The quantity theory of money states that:
a. All else equal an increase in money growth will lead to a proportionate increase in prices in the short-run.
b. An increase in money growth can lead to inflation if and only if velocity is constant.
c. An increase in money growth must lead to a decrease in velocity.
d. All else equal an increase in money growth will lead to a proportionate increase in prices in the long-run.
5.In a country with hyperinflation, the value of money
a. Is increasing over time.
b. Is remaining constant.
c. Is decreasing quickly over time.
d. May either be increasing or decreasing.
Explanation / Answer
1. c. Shoe leather costs.
2. c. Better, worse
3. b. 3.
4.c. An increase in money growth must lead to a decrease in velocity.
5. c. Is decreasing quickly over time.