1, Suppose that changes in bank regulations expand the availability of credit cards, so that people need to hold less cash.

A, how does this event affect the demand for money?

B, if the central bank does not respond to this event what will happen to the price level?

C, if the central bank wants to keep the price level stable, what should it do?

2, explain whether the following statements are true, false, or uncertain.

A, inflation hurts barrowers and help lenders, because barrowers pay a higher rate of interest.

B, if prices change in a way that leaves the overall price level unchanged then no one is made better or worse off.

C, inflation does not reduce the purchasing power of most workers.