An appropriate policy response by a central bank to an increase in the inflation rate is to
A. increase bank reserves
B. lower the federal funds rate
C. buy government bonds from the public
D. sell government bonds to the public
E. none of the above
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At age 18, you decided to bury $1,000 in your back yard and vowed not to use this money until your planned retirement at age 65. What will be the approximate real purchasing power of this money at that time, assuming that the average annual inflation rate over this time period is 4%?
A. 1902-09-26 00:00:00
B. 960
C. 660
D. 460
E. 160
An individual can, to some degree, reduce her vulnerability to high and unanticipated inflation by
A. insisting on long-term wage contracts
B. holding long-term bonds
C. holding cash
D. wage indexation
E. all of the above
In countries where inflation is high and volatile, partial protection from the cost of inflation can be provided by
A. the indexation of debt
B. wage indexation
C. cost-of-living adjustments
D. all of the above
E. none of the above
People should be concerned about imperfectly anticipated inflation since
A. it results in a redistribution of wealth
B. debtors tend to profit while creditors tend to lose
C. equity holders experience a loss in the real value of fixed dividends
D. they may move into higher tax brackets as nominal wages are adjusted for inflation
E. all of the above