ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423623
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 13, Problem 1.6PA
To determine
the reason for which the new discoveries of gold were regularly followed by periods of inflation, when the value of money was based on its gold content.
Concept Introduction:
Money has a major influence on the lives of most people. The more money a person makes, the more goods and services he can consume, resulting into a higher standard of living.
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How does inflation affect the purchasing
power of money, and what are some
common causes of inflation in an economy?
Most central banks, like the Bank of England, set targets for their economy's inflation rate. The Bank of England has an inflation target of 3.5% per year. According to the Quantity Theory of Money, by how much must the Bank of England grow the money stock in order to hit its inflation target?
The Bank of England must decrease the money stock by 3.5% per year.
The Bank of England must increase the money stock by 3.5% per year.
The Bank of England must decrease the money stock by 3.5% per month.
The Bank of England must increase the money stock by 3.5% per month.
Which of the following is NOT an example of commodity money?
Group of answer choices
Salt
Tobacco
Gold
Silver
Silver certificate 5 dollar bill
Chapter 13 Solutions
ECON: MACRO4 (with CourseMate, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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Similar questions
- Assume the supply of money is fixed by the authorities.arrow_forwardExplain why a fall in the purchasing power of money reflects a rise in inflation.arrow_forwardWhich of the following does not describe hyperinflation?Select one:A) . During a hyperinflation people often try to shift to a "hard" currency issued by another country.B) Hyperinflation is often defined as an annual inflation rate higher than 100 percent.C) Germany, Hungary, Bolivia, Ukraine, Venezuela, and Zimbabwe have experienced hyperinflation in the last 100 years.D) . During a hyperinflation people tend to resort to barter to avoid dealing with rapidly inflating currency.E) The purchasing power of money increases dramatically during hyperinflation.arrow_forward
- Japan's central bank, the Bank of Japan, has an inflation target of -0.25% per year (or rather "Deflation Target"). According to the Quantity Theory of Money, by how much must the Bank of Japan grow the money stock in order to hit its inflation target? A) The Bank of Japan must increase the money stock by 0.25% per year. B) The Bank of Japan must decrease the money stock by 0.25% per year. C) The Bank of Japan must increase the money stock by 0.25% per month. D) The Bank of Japan must decrease the money stock by 0.25% per month.arrow_forwardHow does the concept of commodity money differ from fiat money, and what are the advantages and disadvantages of each? A) Commodity money is paper currency with no intrinsic value, while fiat money is backed by tangible assets like gold; advantages of commodity money include stability, while disadvantages include limited supply. B) Commodity money is backed by tangible assets like gold, while fiat money has no intrinsic value; advantages of fiat money include flexibility, while disadvantages include the potential for inflation. C) Commodity money is a type of cryptocurrency, while fiat money refers to physical currency. D) Commodity money and fiat money are identical concepts with no differences.arrow_forwardWith the aid of a well-labeled diagram, carefully explain the impact on the money market if there was a discovery of gold that fuels inflation.arrow_forward
- Over the past 12 years, Zambia has experienced an inflation rate of 9.8% per year. What does this suggest about the growth of Zambia's money stock according to the Quantity Theory of Money? Zambia's money stock has decreased by 9.8 percent per year over the past 12 years. Zambia's money stock has increased by 0.817 percent per year over the past 12 years. Zambia's money stock has increased by 9.8 percent per year over the past 12 years. Zambia's money stock has decreased by 0.817 percent per year over the past 12 years.arrow_forwardAccording to the Quantity Theory of Money there is a direct relationship between money supply and inflation. Provide a clear explanation of the precise quantitative nature of such a relationship.arrow_forwardIn countries with extremely high inflation, increases in the money supply: A) are quickly translated into changes in the inflation rate. B) do not affect the price level. C) will decrease real GDP. D) will increase real GDP.arrow_forward
- How does the increase of prices of goods affect the purchasing power of money?arrow_forwardWhat is the supply, demand, and price of money?arrow_forwardAccording to the Quantity Theory of Money there is a direct relationship between money supply and inflation. In no more than 75 words, provide a brief and clear explanation of the precise quantitative nature of such a relationship.arrow_forward
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