SOLVED

11) Which of the following is not a consequence of hyperinflation? A) Money’s function as a medium of exchange is enhanced. B) Money loses value so rapidly that firms and individuals stop holding it. C) It causes an economy to suffer slow growth. D) The price level grows in excess of hundreds of percentage points per year. 12) The German Hyperinflation of the early 1920s was caused by A) the German government raising funds for expenditures by selling bonds to the central bank. B) an overly aggressive monetary policy implemented to combat a severe recession. C) rising oil prices after World War I caused a severe stagflation and hyperinflation. D) large deficits resulting from the high levels of war spending and falling taxes. 13) In an attempt to bring lenders and borrowers together following the financial crisis of 2008, the Federal Reserve made a large amount of new funds available to financial markets. Any of these new funds that are loaned out by banks would be classified as ________ of the banks. A) required reserves B) excess reserves C) deposits D) liabilities 14) In an attempt to bring lenders and borrowers together following the financial crisis of 2008, the Federal Reserve made a large amount of new funds available to financial markets. The Fed expected this to increase in the money supply and the total amount of lending because of the multiplier effect, in which a given amount of new reserves results in a multiple increase in A) stockholder’s equity. B) bank deposits. C) long-term debt. D) required reserves. 15) There is a strong link between changes in the money supply and inflation A) in both the short run and the long run. B) in neither the short run nor the long run. C) in the short run, but not in the long run. D) in the long run, but not in the short run. 16) If the rate of growth in real GDP exceeds the rate of growth in the money supply, the quantity theory of money predicts a price deflation. 17) Hyperinflations occur because governments want to spend more than they raise in taxes, and they pay for the extra purchases by printing money. 18) For the purchasing power of money to increase, the price level has to fall. 19) How is the quantity theory of money different from the quantity equation and why must the quantity equation always be true? 20) Suppose the velocity of money is not fixed, but stable at about two percent growth per year. How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified quantity theory of money with velocity growing at two percent per year, what would the growth rate of the other variables in the theory need to be to cause inflation?Â