Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971509
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 17.1, Problem 1QQ
To determine
Growth rate of money, quantity theory of money, and fisher effect.
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the government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year. what happened to prices?
What is happening to inflation in the US economy?
What can the Fed do to reduce inflation when the government is spending too much money in the economy?
Chapter 17 Solutions
Principles of Macroeconomics (MindTap Course List)
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- How might rapid inflation affect college enrollments?arrow_forwardThe central bank decided to raise interest rates when it wanted to reduce aggregate demand to fight inflation. How does an increase in interest rates reduce aggregate demand?arrow_forwardIn the 1970's in the U.S., what happened to inflation and unemployment? What caused this to happen? The 80's and 90's brought about more stability in world economic systems. Explain the change in central banks that contributed to this effect. What happened to interest rates after the financial crisis of 2008? Was that result expected? What are the dangers of having an inflation rate that's too low? Should central banks be independent of the federal government? Why or why not?arrow_forward
- Does printing money and circulating the same in the economy always lead to an increase in inflation. Explain your position.arrow_forwardHow might a rapid rise in inflation harm you? How might a rapid rise in inflation help you? In answering this question consider your role as both a consumer, worker, and borrower. Consider the likely effect on your real wages, and any interest you receive as a saver. Would it be advantageous to borrow money if you expected inflation to rise? Does it make economic sense to open a savings account at a bank given the latest increase in the CPI.arrow_forwardIf the Federal Reserve believes that the economy is heating up and there is a risk that inflation may accelerate, what could they do to slow down economic growth and tighten credit conditions in the economy? What did the FOMC decide in its last meeting?arrow_forward
- You take out student loans to help pay for your degree at a 5% annual interest rate. Assume the bank expected inflation to average 3% per year. What real interest rate did they expect to earn from your loan? What happens if inflation is actually 5% per year? Who is better off if inflation is higher than expected? What if it is lower than expected? Why?arrow_forwardWhen the United States economy goes through a period of extended growth, the economy is said to be heating up! Unemployment is low and companies are increasing workers’ wages above the national minimum wage. The Federal Reserve (FED) is concerned that these wage increases will result in inflation; higher prices throughout the economy. What can the FED do?arrow_forwardWhat do you mean by inflation? What are the causes of inflation?arrow_forward
- Suppose if the inflation rate of a country increases sharply. What happens to the inflation tax on money holders? Why does the wealth held in savings accounts not depend on changes in inflation tax? Can you think of a way that holders of savings accounts are hurt by rising inflation?arrow_forwardWhat measures should the central bank take to reduce inflation? Show by drawing a graph.arrow_forwardHow do changes in the money supply affect the economy?arrow_forward
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