What is money illusion quizlet?
Money illusion is: mistaking changes in nominal prices for changes in real prices. When the expected rate of inflation is higher than the actual rate of inflation, wealth is: redistributed from borrowers to lenders.
Which situation is one of the costs of inflation covered in the textbook?
Which situation is one of the costs of inflation covered in the textbook? Inflation can lead to a breakdown of financial intermediation. High and volatile inflation makes long-term lending very difficult.
When an economy experiences volatile and unpredictable hyperinflation?
When an economy experiences volatile and unpredictable hyperinflation: it causes a breakdown of financial intermediation. If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be: 8.33%.
Which of the following summarizes the Fisher effect?
Which of the following summarizes the Fisher Effect? Nominal interest rates will rise with expected inflation.
What’s inflation quizlet?
Inflation is an increase in the average level of prices. The inflation rate is the percentage change in the average level of prices (as measured by a price index) over a period of time.
What did Bolivians use as money when their currency became worthless?
As the paper money in Bolivia rapidly became more and more worthless, due to hyperinflation, people without electricity began to buy electronic goods because these goods had value to them. Another item that Bolivians used as money was a mentholated rub that reduces pain.
What is the Fisher equation in economics?
Named after Irving Fisher, an American economist, it can be expressed as real interest rate ≈ nominal interest rate − inflation rate.In more formal terms, where r equals the real interest rate, i equals the nominal interest rate, and π equals the inflation rate, the Fisher equation is r = i – π.
What represents Fisher’s equation?
What is deflation quizlet?
Deflation is a persistent fall in the average level of prices in an economy. aggregate demand or aggregate supply curve will illustrate that a fall in the aggregate demand will result in a decrease in the price level and a decrease in the real output.