 Show CHAPTER 6 MONEY GROWTH AND INFLATION 1. Inflation can be measured by the change in the consumer price index. percentage change in the consumer price index. percentage change in the price of a specific commodity. change in the price of a specific commodity. 2. If the price level increased from 120 to 126, then what was the inflation rate? None of the above is correct. 3. If P denotes the price of goods and services measured in terms of money, then 1/P represents the value of money measured in terms of goods and services. P can be regarded as the “overall price level.” an increase in the value of money is associated with a decrease in P. All of the above are correct. 4. With the value of money on the vertical axis, the money supply curve is 5. When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a movement to the right along the money demand curve. movement to the left along the money demand curve. shift to the right of the money supply curve. shift to the left of the money supply curve. 6. When the money market is drawn with the value of money on the vertical axis, if money demand shifts leftward, then initially there is an excess demand for money which causes the price level to rise. excess demand for money which causes the price level to fall. excess supply of money which causes the price level to rise. excess supply of money which causes the price level to fall. 7. The price level falls if either money demand or money supply shifts rightward. money demand shifts rightward or money supply shifts leftward. money demand shifts leftward or money supply shifts rightward. money demand or money supply shifts leftward. 8. Money demand depends on the price level and the interest rate. Why is this page out of focus?This is a Premium document. Become Premium to read the whole document. Why is this page out of focus?This is a Premium document. Become Premium to read the whole document. Why is money 1 p value?The value of money = 1/P where P is the price level. To understand this, imagine that there was one good in the economy, say, widgets. The price level would then simply be the money price of widgets.
What is P in quantity theory of money?M = Money supply. V = Velocity of money. P = Price level. T = volume of the transactions.
What is P in the money demand function?Md = demand for nominal money balances (demand for M1) Ld = demand for liquidity function. P = aggregate price level (CPI or GDP deflator) Y = real income (real GDP)
What happen on the nominal money when price P increases?An increase in the price level (P $) causes a decrease in the real money supply (M S/P $) since M S remains constant.
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If p denotes the price of goods and services measured in terms of money, then
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