Chapter 7

Question 1

Equation of Exchange

Answer 1

Shows relationship between prices and money supply

MV=PQ

Question 2

M

Answer 2

money supply

Question 3

P

Answer 3

price level

Question 4

Q

Answer 4

amount of output produced by economy

Question 5

PQ

Answer 5

amount spent on output at current price level

Question 6

V

Answer 6

velocity

Question 7

Velocity

Answer 7

average number of times $1 turns over

Question 8

result of SIMPLE QUANTITY THEORY is that the price lever and money supply are…

Answer 8

potentially related.

Question 9

Where does inflation come from?

Answer 9

Fed and banking system increasing money supply

Question 10

Nominal Interest Rate

Answer 10

Rate that is advertised

Question 11

Real Interest Rate

Answer 11

Nominal interest rate, based on what expect inflation to be

Question 12

Secured Loans

Answer 12

loans backed with an asset

Question 13

Unsecured Loans

Answer 13

Nothing backing the loan

Question 14

Monetizing the Debt

Answer 14

Central bank attempts to assist state in borrowing by purchasing debt for dollars

Question 15

With inflation, borrowers…

Answer 15

gain and lenders lose

Question 16

Inflationary Tax

Answer 16

State create inflation to reduce value of the debt