revision questions chapter 28 pt1

Question 1

If both lenders and borrowers expect less inflation than actually occurs, borrowers are ________ and lenders are ________.

Answer 1

helped; hurt

Question 2

Inflation that is higher than expected redistributes wealth toward

Answer 2

borrowers

Question 3

Movements downward along the short-run Phillips curve result from unanticipated

Answer 3

decreases in aggregate demand.

Question 4

A one-time rise in the price level can turn into a demand-pull inflation when ________.

Answer 4

the quantity of money persistently increases

Question 5

fact

Answer 5

According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run.

Question 6

If workers and employers base their wages on an inflation forecast that turns out to be correct,

Answer 6

neither workers nor employers gain or lose from the inflation.

Question 7

________ is a change that is NOT a potential start of a demand-pull inflation.

Answer 7

An increase in the price of oil

Question 8

A one-time increase in the price of oil without any following change in aggregate demand produces

Answer 8

stagflation.

Question 9

In the quantity theory of money, the velocity of circulation is assumed to

Answer 9

be not influenced by the quantity of money.

Question 10

The quantity theory of money predicts how changes in the quantity of money

Answer 10

affect the price level.`

Question 11

the short run Philips curve

Answer 11

states that when unemployment is low, inflation tends to be high, and when unemployment is high, inflation tends to be low.