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- Inflation, Disinflation, and Deflation – End of Chapter Problem Country Inflation in 2019 Money supply in 2019 (billions) Central government receipts in 2019 (billions) India 7.66% Rp36,883 Rp12,828 United States 1.81% $3,981 $3,331 Data from: Bureau of Economic Analysis; Controller General of Accounts (India); Reserve Bank of India; International Monetary Fund; The World Bank. The inflation tax is often used as a significant source of revenue in developing countries, where tax collection and reporting systems are not well-developed, and tax evasion may be high. a. Use the numbers in the accompanying table to calculate the inflation taxes in the United States and India (Rp = rupees). Enter your answers in billions of dollars or rupees, and round all answers to the nearest tenth. U.S. inflation tax: $ billion Indian inflation tax: Rp billion b. How large is the inflation tax for each country when calculated as a percentage of government receipts? United States: % India: %Discuss money supply and inappropriate government polices as causes of economicflatuationsMoney supply growth 10% p year real output growth 3% p year using theory quantity of money what is inflation rate
- Increases in the rate of inflation Select one: a. Always coincide with a decrease in the unemployment rate b. Are more pronounced in periods of recession c. Generally are inversely related to the output gap d. Generally do not occur in periods of high growth in money supplyThe simple solution to fighting inflation is reducing the growth rate of the money supply true FalseIn a hyperinflationary economy, monetary items: a. Are not restated because they are already expressed in terms of the measuring unit current at year-end b. Are measured at fair value c. Are restated applying the general price index d. Are restated applying the specific price index
- There is a ________ association between inflation and the growth rate of money ________. A) positive; demand B) positive; supply C) negative; demand D) negative; supply Everything else held constant, a stronger dollar benefits ______ and hurts ________. A) American businesses; American consumers B) American businesses; foreign businesses C) American consumers; American businesses D) foreign businesses; American consumers Financial markets have the basic function of A) getting people with funds to lend together with people who want to borrow funds. B) assuring that the swings in the business cycle are less pronounced. C) assuring that governments need never resort to printing money. D) providing a risk-free repository of spending power. Which of the following can be described as involving indirect finance? A) You make a loan to your neighbor. B) You buy shares in a mutual fund. C) You buy a U.S. Treasury bill from the U.S. Treasury at Treasury Direct.gov. D) You purchase…In countries that have experienced hyperinflation, what role have large government budget deficits played in causing the very high inflation rates?What is inflation? A) A decrease in the general price level B) An increase in the general price level C) A decrease in the money supply D) An increase in the money supply
- Inflation target are based on the assessment of the monetary condition of the economy. *TRUE or FALSEHigh inflation could be a problem to business firms. Explain THREE costs of inflation that could adversely affect business operations.When Japan experiences unexpected high inflation a) The bank of Japan shouldn't intervene because it won't affect the value of Japanese Yuan b) it will not redistribute wealth between lenders and borrowers c) none of the real terms of economy will be affected d) no answer above
