hapter 8 1. A government is more likely to utilize the inflation tax if (a) it is running a budget deficit. (b) lenders worry that the government will not pay back its debts. (c) politicians will not raise taxes, because they cannot be reelected if they do. (d) All of the above are correct. 2. Which of the following people benefits from a surprise increase in inflation? (a) a person receiving a fixed pension (b) a person with a variable rate mortgage (c) a person who borrowed large amounts of money on a fixed payment schedule (d) a lender of large amounts of money who is repaid on a fixed schedule 3. The quantity theory of money says that a doubling of the growth rate in the money supply will, in the long run, lead to (a) a doubling of real GDP growth. (b) a doubling of inflation. (c) a decrease of inflation. (d) a doubling of the price level. 4. Under the classical dichotomy, which of the following does not determine real GDP in the long run? (a) the investment rate (b) the aggregate price level (c) TFP (d) new ideas