曼昆经济学原理英文版文案加习题答案30章Word格式.docx

曼昆经济学原理英文版文案加习题答案30章Word格式.docx

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whysomecountriesprintsomuchmoneythattheyexperiencehyperinflation.

howthenominalinterestraterespondstotheinflationrate.

thevariouscoststhatinflationimposesonsociety.

CONTEXTANDPURPOSE:

Chapter17isthesecondchapterinatwo-chaptersequencedealingwithmoneyandpricesinthelongrun.Chapter16explainedwhatmoneyisandhowtheFederalReservecontrolsthequantityofmoney.Chapter17establishestherelationshipbetweentherateofgrowthofmoneyandtheinflationrate.

Thepurposeofthischapteristoacquaintstudentswiththecausesandcostsofinflation.Studentswillfindthat,inthelongrun,thereisastrongrelationshipbetweenthegrowthrateofmoneyandinflation.Studentswillalsofindthattherearenumerouscoststotheeconomyfromhighinflation,butthatthereisnotaconsensusontheimportanceofthesecostswheninflationismoderate.

KEYPOINTS:

∙Theoveralllevelofpricesinaneconomyadjuststobringmoneysupplyandmoneydemandintobalance.Whenthecentralbankincreasesthesupplyofmoney,itcausesthepriceleveltorise.Persistentgrowthinthequantityofmoneysuppliedleadstocontinuinginflation.

∙Theprincipleofmonetaryneutralityassertsthatchangesinthequantityofmoneyinfluencenominalvariablesbutnotrealvariables.Mosteconomistsbelievethatmonetaryneutralityapproximatelydescribesthebehavioroftheeconomyinthelongrun.

∙Agovernmentcanpayforsomeofitsspendingsimplybyprintingmoney.Whencountriesrelyheavilyonthis“inflationtax,”theresultishyperinflation.

∙OneapplicationoftheprincipleofmonetaryneutralityistheFishereffect.AccordingtotheFishereffect,whentheinflationraterises,thenominalinterestraterisesbythesameamount,sothattherealinterestrateremainsthesame.

∙Manypeoplethinkthatinflationmakesthempoorerbecauseitraisesthecostofwhattheybuy.Thisviewisafallacy,however,becauseinflationalsoraisesnominalincomes.

∙Economistshaveidentifiedsixcostsofinflation:

shoeleathercostsassociatedwithreducedmoneyholdings,menucostsassociatedwithmorefrequentadjustmentofprices,increasedvariabilityofrelativeprices,unintendedchangesintaxliabilitiesduetononindexationofthetaxcode,confusionandinconvenienceresultingfromachangingunitofaccount,andarbitraryredistributionsofwealthbetweendebtorsandcreditors.Manyofthesecostsarelargeduringhyperinflation,butthesizeofthesecostsformoderateinflationislessclear.

CHAPTEROUTLINE:

I.TheinflationrateismeasuredasthepercentagechangeintheConsumerPriceIndex,theGDPdeflator,orsomeotherindexoftheoverallpricelevel.

A.Overthepast80years,priceshaverisenonaverage3.6%peryearintheUnitedStates.

1.Therehasbeensubstantialvariationintherateofpricechangesovertime.

2.From2002to2012,pricesroseatanaveragerateof2.5%peryear,whilepricesroseby7.8%peryearduringthe1970s.

B.Internationaldatashowsanevenbroaderrangeofinflationexperiences.In2012,inflationwas0.1%inJapan,5.1%inRussia,9.3%inIndia,and21.1%inVenezuela.

II.TheClassicalTheoryofInflation

Startoffthechapterbydifferentiatingbetweena“once-and-for-all”increaseintheaveragelevelofpricesandacontinuousincreaseinthepricelevel.Alsomakesurethatstudentsrealizethatinflationmeansthattheaveragelevelofpricesintheeconomyisrisingratherthanthepricesofallgoods.

ItisinstructivetoreviewtheinflationhistoryoftheUnitedStates.Whileyourstudentsarelikelyfullyawareofinflation,theymaynotrealizethat,priortoWorldWarII,theUnitedStatesexperiencedseveralperiodsofdeflation.AlsopointouttothestudentsthattherateofinflationhasvariedsignificantlysinceWorldWarII.

A.TheLevelofPricesandtheValueofMoney

1.Whenthepricelevelrises,peoplehavetopaymoreforthegoodsandservicestheybuy.

2.Ariseinthepricelevelalsomeansthatthevalueofmoneyisnowlowerbecauseeachdollarnowbuysasmallerquantityofgoodsandservices.

3.IfPisthepricelevel,thenthequantityofgoodsandservicesthatcanbepurchasedwith$1isequalto1/P.

4.Supposeyouliveinacountrywithonegood（icecreamcones）.

a.Whenthepriceofanicecreamconeis$2,thevalueofadollaris1/2cone.

b.Whenthepriceofanicecreamconerisesto$3,thevalueofadollaris1/3cone.

B.MoneySupply,MoneyDemand,andMonetaryEquilibrium

1.Thevalueofmoneyisdeterminedbythesupplyanddemandformoney.

2.Forthemostpart,thesupplyofmoneyisdeterminedbytheFed.

3.Thedemandformoneyreflectshowmuchwealthpeoplewanttoholdinliquidform.

a.Onevariablethatisveryimportantindeterminingthedemandformoneyisthepricelevel.

b.Thehigherpricesare,themoremoneythatisneededtoperformtransactions.

c.Thus,ahigherpricelevel（andalowervalueofmoney）leadstoahigherquantityofmoneydemanded.

4.Inthelongrun,moneysupplyandmoneydemandarebroughtintoequilibriumbytheoveralllevelofprices.

a.Ifthepricelevelisabovetheequilibriumlevel,peoplewillwanttoholdmoremoneythanisavailableandpriceswillhavetodecline.

b.Ifthepricelevelisbelowequilibrium,peoplewillwanttoholdlessmoneythanthatavailableandthepricelevelwillrise.

Figure1

5.Wecanshowthesupplyanddemandformoneyusingagraph.

a.Thehorizontalaxisshowsthequantityofmoney.

b.Theleft-handverticalaxisisthevalueofmoney,measuredby1/P.

c.Theright-handverticalaxisisthepricelevel（P）.Notethatitisinverted—ahighvalueofmoneymeansalowpricelevelandviceversa.

d.ThesupplycurveisverticalbecausetheFedhasfixedthequantityofmoneyavailable.

e.Thedemandcurveformoneyisdownwardsloping.Whenthevalueofmoneyislow,peopledemandalargerquantityofittobuygoodsandservices.

f.Attheequilibrium,thequantityofmoneydemandedisequaltothequantityofmoneysupplied.

C.TheEffectsofaMonetaryInjection

1.AssumethattheeconomyiscurrentlyinequilibriumandtheFedsuddenlyincreasesthesupplyofmoney.

2.Thesupplyofmoneyshiftstotheright.

Figure2

3.Theequilibriumvalueofmoneyfallsandthepricelevelrises.

4.Whenanincreaseinthemoneysupplymakesdollarsmoreplentiful,theresultisanincreaseinthepricelevelthatmakeseachdollarlessvaluable.

5.Definitionofquantitytheoryofmoney:

atheoryassertingthatthequantityofmoneyavailabledeterminesthepricelevelandthatthegrowthrateinthequantityofmoneyavailabledeterminestheinflationrate.

D.ABriefLookattheAdjustmentProcess

1.Theimmediateeffectofanincreaseinthemoneysupplyistocreateanexcesssupplyofmoney.

2.Peopletrytogetridofthisexcesssupplyinavarietyofways.

a.Theymaybuygoodsandserviceswiththeexcessfunds.

b.Theymayusetheseexcessfundstomakeloanstoothersbybuyingbondsordepositingthemoneyinabankaccount.Theseloanswillthenbeusedbyotherstobuygoodsandservices.

c.Ineithercase,theincreaseinthemoneysupplyleadstoanincreaseinthedemandforgoodsandservices.

d.Becausethesupplyofgoodsandserviceshasnotchanged,theresultofanincreaseinthedemandforgoodsandserviceswillbehigherprices.

E.TheClassicalDichotomyandMonetaryNeutrality

1.Inthe18thcentury,DavidHumeandothereconomistswroteabouttherelationshipbetweenmonetarychangesandimportantmacroeconomicvariablessuchasproduction,employment,realwages,andrealinterestrates.

2.Theysuggestedthateconomicvariablesshouldbedividedintotwogroups:

nominalvariablesandrealvariables.

a.Definitionofnominalvariables:

variablesmeasuredinmonetaryunits.

b.Definitionofrealvariables:

variablesmeasuredinphysicalunits.

3.Definitionofclassicaldichotomy:

thetheoreticalseparationofnominalandrealvariables.

4.Pricesintheeconomyarenominal（becausetheyarequotedinunitsofmoney）,butrelativepricesarereal（becausetheyarenotmeasuredinmoneyterms）.

5.Classicalanalysissuggestedthatdifferentforcesinfluencerealandnominalvariables.

a.Changesinthemoneysupplyaffectnominalvariablesbutnotrealvariables.

b.Definitionofmonetaryneutrality:

thepropositionthatchangesinthemoneysupplydonotaffectrealvariables.

Mankiw’sanalogyofchangingthesizeofayardfrom36inchesto18inchesisausefulwaytoexplaintheconfusionthatachangeinaunitofmeasurement（oraunitofaccount）cancause.

F.VelocityandtheQuantityEquation

1.Definitionofvelocityofmoney:

therateatwhichmoneychangeshands.

2.Tocalculatevelocity,wedividenominalGDPbythequantityofmoney.

3.IfPisthepricelevel（theGDPdeflator）,YisrealGDP,andMisthequantityofmoney:

4.Rearranging,wegetthequantityequation:

ALTERNATIVECLASSROOMEXAMPLE:

Supposethat:

Wecanshowthat:

5.Definitionofquantityequation:

theequationM×

V=P×

Y,whichrelatesthequantityofmoney,thevelocityofmoney,andthedollarvalueoftheeconomy’soutputofgoodsandservices.

a.Thequantityequationshowsthatanincreaseinthequantityofmoneymustbereflectedinoneoftheotherthreevariables.

b.Specifically,thepricelevelmustrise,ou