Question

Interest rates stated in the financial pages of newspapers and websites such as the Wall Street Journal are nominal variables

true

false

Although the inflation tax has not been a principle source of revenue for the U.S. government for most of its history, some governments may prefer an inflation tax to some other kind of tax since the inflation tax is easier to impose even though it increases inflation

true

false

If velocity is stable and money is neutral, then an increase in the money supply of 5 percent when real GDP is increasing at a rate of 3 percent will lead to the result of deflation

true

false

Suppose that velocity and real output are constant, and that the quantity theory and Fisher effect are both correct. If nominal interest rates are 6.5 percent and the inflation rate is 2.0 percent it follows that the real interest rate is 2.0 percent.

true

false

The shoe leather cost of inflation refers to the waste of resources used to maintain lower money holdings and the shoe leather cost of inflation is significant in countries with hyperinflation

true

false

Answer 1

a) True, those are the nominal rates and to get the real rates they should be adjusted against the inflation.

b) False, inflation tax is the extra amount the person has to pay due to increased inflaiton. this is not a prefered source of income for any market.

c) False, as the ouptut is less than the increase in the money supply this will result in inflation.

d) False, it will be 6.5-2 = 4.

e) True, both the conditions of the shoes leather cost is correct.