Assume we know that over the last 5 years, the velocity of M2 has been decreasing by 1% per year. Meanwhile, inflation has been constant at 2% per year, and real GDP has increased by 4% per year. According to the Quantity Theory of Money, we can conclude that: A. Money supply has grown by about 1% per year. B. Money supply has grown by about 3% per year. C. Money supply has grown by about 5% per year. D. Money supply has grown by about 7% per year. E. None of the above answers are correct.

Assume we know that over the last 5 years, the velocity of M2 has been decreasing by 1% per year. Meanwhile, inflation has been constant at 2% per year, and real GDP has increased by 4% per year. According to the Quantity Theory of Money, we can conclude that: A. Money supply has grown by about 1% per year. B. Money supply has grown by about 3% per year. C. Money supply has grown by about 5% per year. D. Money supply has grown by about 7% per year. E. None of the above answers are correct.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter13: Monetary Policy

Section: Chapter Questions

Problem 6E

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Q) Suppose the money supply grew at an average annual rate of 20%, velocity was constant, the nominal interest rate averaged 16%, and output grew at an average annual rate of 8%. According to the Quantity Theory, a. inflation averaged 6% per year and the real rate of return was 2%. b. inflation averaged 12% per year and the real rate of return was 4%. c. inflation averaged 10% per year and the real rate of return was 8%. d. inflation averaged 20% per year and the real rate of return was 6%.
| 14. Velocity in the country of Shem is always stable. In 2002, the money supply was $200 billion and the GDP price deflator was four times as high as it was in the base year. In 2003, the money supply increased to $240 billion, the price level increased by 15 percent, and nominal GDP equaled $1,200 billion. By how much did real GDP increase between 2002 and 2003? 20 percent a. b. 4.35 percent c. 2.17 percent d. There is not enough information to answer the question.
21.According to the quantity theory of money, ultimate control over the rate of inflation in the United States is exercised by: A)the Organization of Petroleum Exporting Countries (OPEC). B)the U.S. Treasury. C)the Federal Reserve. D)private citizens. 22.According to the quantity theory of money, if money is growing at a 10 percent rate and real output is growing at a 3 percent rate, but velocity is growing at increasingly faster rates over time as a result of financial innovation, the rate of inflation must be: A)increasing. B)decreasing. C)7 percent. D)constant. 23.If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent. A)3 B)4 C)9 D)11 24.Percentage change in P is approximately equal to the percentage change in: A)M. B)M minus percentage change in Y. C)M minus percentage change in Y plus percentage change in velocity. D)M minus…
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5. The growth rate of real GDP in Rutland is 6%. Assume the growth rate of velocity is 0%. If Rutland wishes to decrease the inflation rate from the annual rate of 4.2% to a target rate of 3% and maintain its current growth rate of real GDP, by how many percentage points will the growth rate of the money supply need to change?
34. In an economy, the money supply growth rate is 5.0%, the equilibrium real interest rate is 1.5%, the potential growth rate is 4.0%, the economic growth rate is 1.0%, the inflation rate is 3.0%, the unemployment rate is 4.5%, and the rate of increase in the circulation speed is -2%. In this case, in an economy that pursues an inflation target of 2.0%, what is the appropriate interest rate target based on Taylor's rule? (Omit the unit and answer with the first decimal place.)
11. Since 1990, money supply in the Japanese economy has doubled. Over the same period,nominal GDP in Japan has stayed almost constant. According to the Quantity Theory of Money,this suggests thata) the level of real GDP must have decreased.b) the level of real GDP must have increased.c) the velocity of money must have decreased.d) none of the above 13. According to the trilemma, which of the following is a potential cost of adopting a flexibleexchange rate regime?a) A country may have to restrict the size of capital flows.b) A country may su↵er from a volatile exchange rate.c) A country loses the ability to conduct independent monetary policy.d) None of the above. 14. In an open economy, if the level of net exports rises, it must be the case thata) there is an increase in saving.b) there is an increase in investment.c) the value of saving less investment must fall.d) none of the above
The following data come from FRED, a database maintained by the St Louis Fed. According to FRED, Real GDP in 2009 was 97.5% of Real GDP in 2010. If so, then the inflation rate from 2009 should be. less than predicted by the Quantity Theory of Money because the Velocity of Money was slightly faster in 2010 than in 2009. Year M2 Nominal GOP 2009 $8.408 $14.45T % and that is slightly 2010 $8.618 $14.99T Type your numeric answer and submit
if the central bank...?
The neutrality of money revisited a. Fill in the empty spaces after Year 1 in the chart below: b. What is the growth rate of the nominal money supply between years 1 and 2, 2 and 3, and 3 and 4? c. What is the rate of inflation between years 1 and 2, 2 and 3, and 3 and 4? d. What is the change in the real money supply between years 1 and 2, 2 and 3, and 3 and 4? e. What assumption has been made about real output growth if this data describe the medium run?
3.. 1On the planet of Unjustice, the velocity of money is constant. The growth rate of real GDP is by 6% per year, the money supply grows by 20% per year, and the nominal interest rate is 24%. What is the real interest rate in the planet of Unjustice?