economics review (inflation and deflation)

If the economy is experiencing inflation, over the long term it is in your best interest to hold onto:

Gold or real estate

The term dual coincidence of wants refers to:

when a barter trade takes place, one side of the transaction has to want what the other side has and vice versa

If in an economy, the money supply is $4 Billion and total GDP for one year is
$28 Billion, then the Velocity of money in that economy for that one year must
be:

7

The inflation adjusted purchasing power as expressed in the amount of goods that
you can purchase is referred to as:

real wealth

If a Retiree is living on a Fixed Income consisting of a pension and Social
Security, if the economy experienced inflation, with regard to their purchasing
power, that person would be:

worse off

If a Retiree is living on a Fixed Income consisting of a pension and Social
Security, if the economy experienced Deflation, with regard to their purchasing
power, that person would be:

better off

The entity in a country that has the ability to alter the money supply of an
economy is called the:

central bank

Which is the Following is NOT a tool used by the Federal Reserve to manage the
money supply:

tax on deposits

In an environment where the economy is very strong with high inflation and fears
of hyperinflation are rampant, the central bank is most likely to engage in:

contractionary monetary policy

In the US, if the Federal Reserve increases the supply of money then it is most
likely that (hint: on a separate piece of paper draw a diagram of a Demand and
Supply Curve for Money):

The supply curve for money will shift to the right and interest rates will fall to a lower equilibrium point

Which of the following is NOT a requirement of a country utilizing the Gold
Standard:

a country is required to have its own gold mines

what is nominal wealth

The hard dollar amount of wealth you hold at any one time expressed in today’s dollars reflects nominal purchasing power

what is real wealth

Real purchasing power as expressed in the amount of goods that you can purchase.

what is hyperinflation

refers to a very high rate of inflation generally greater than 100% per year

what is contractionary monetary policy

a decrease in the money supply which dampens overall economic activity resulting in lower levels of output, employment and incomes in the short term (but greater stability in the long term)

what is expansionary monetary policy

an increase in the money supply which provides a short term stimulus to the macro economy, resulting in higher levels of output, employment and incomes

price control

a legal restriction on the price at which trade can take place