MACROECONOMICS CHAPTER 17
Questions with Correct Answers
What happens when unexpected inflation occurs? Unexpected inflation arbitrarily
redistributes wealth. If there is inflation, lenders pay back less real money to borrowers. If there
is deflation, lenders pay back more to borrowers.
Quantity equation The equation MxV=PxY, which relates the quantity of money, the
velocity of money, and the dollar value of the economy's output of goods and services
Velocity of money The rate at which money changes hands
Classical dichotomy The theoretical separation of nominal and real variables
Is inflation more about the value of money or the value of goods? Inflation is more about
the value of money than the value of goods
What happens when the overall price level rises The value of money falls and the quantity
of money demanded increases
Questions with Correct Answers
What happens when unexpected inflation occurs? Unexpected inflation arbitrarily
redistributes wealth. If there is inflation, lenders pay back less real money to borrowers. If there
is deflation, lenders pay back more to borrowers.
Quantity equation The equation MxV=PxY, which relates the quantity of money, the
velocity of money, and the dollar value of the economy's output of goods and services
Velocity of money The rate at which money changes hands
Classical dichotomy The theoretical separation of nominal and real variables
Is inflation more about the value of money or the value of goods? Inflation is more about
the value of money than the value of goods
What happens when the overall price level rises The value of money falls and the quantity
of money demanded increases
