In the quantity theory of money, velocity is assumedA) to increase with increases in the money supply.B) to equal 1.4.C) constant.D) to be a declining number.Velocity isA) not constantif the demand for money depends on the interest rate.B) infiniteC) zeroIf the demand for money depends on thequantity theory of moneyA) interest rate; does not holdC) level of GDP; still holdsIf the equation for thefor money depends on nominal income but not the interest rate.D) constantand the velocity is not constant, then theB) interest rate; still holdsD) level of GDP; does not holdis looked on as a demand-for-money equation, then the demancA) unanticipated inflation rateC) Keynesian income-expenditure modelMonetarists and Keynesiansimpact of fiscal policy on the economy.A) agree; agreeC) disagree; disagreeB) real business cycle theoryD) quantity theory of moneyFor price stability, monetarists argue that the money supply should grow at a rateaverage growth of real output.A) equal toB) independent ofC) greater thanon the speed at which wages change, andB) agree; disagreeD) disagree; agreeD) less thantheon the

Velocity of money:Velocity of money refers to the rate at which money is exchanged or spent in an…

In the quantity theory of money, velocity is assumed A) to increase with increases in the money supply. B) to equal 1.4. C) constant. D) to be a declining number. Velocity is T A) not constant if the demand for money depends on the interest rate. B) infinite C) zero D) constant

In the quantity theory of money, velocity is assumed A) to increase with increases in the money supply. B) to equal 1.4. C) constant. D) to be a declining number. Velocity is T A) not constant if the demand for money depends on the interest rate. B) infinite C) zero D) constant

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose the economy is experiencing inflation. If the Federal Reserve enacts contractionary monetary policy, interest rates will likely Multiple Choice rise causing prices to decrease. fall causing prices to increase. fall causing prices to decrease. rise causing prices to increase
This question uses approximate data from 2020. Over the year real GDP declined by about 3 percent, the inflation rate was about 1 percent, and the money supply increased by about 25 percent. What does this tell us about the velocity of money and the quantity equation (MV PY) over the year 2020. = Question 26 options: That velocity must have increased by a substantial amount. That velocity must have decreased by a substantial amount. That velocity was constant. That the quantity equation is not correct.
3 Money demand function · Suppose a country has a money demand function: M. 0.5Y i a) Is velocity a constant value? If not, please derive the expression for velocity of money. b) Now assume the interest rate is 2.5%, calculate the velocity.
Refer to the information provided in the below figure to answer the questions that follow. M M Money 14) All of the following events can cause a movement from Point E to Point A EXCEPT a) an increase in income. b) an increase in the price level. c) a decrease in the interest rate. d) an increase in transactions. 15) The movements along the same money demand curve. a) speculative; transaction b) transaction; precautionary c) transaction; speculative d) precautionary, transaction motive shifts the money demand curve, and the motive causes Refer to the information provided in the below table to answer the questions that follow. Interest rate (%)
QUESTION THREE Assuming a constant velocity of money while the money supply is growing 10% per year, real GDP is growing at 4% per year, and the real interest rate is r = 8%. Assume that actual Inflation is equal to expected inflation. a) Find the value of the nominal interest rate in this economy b) If the central bank increases the money growth rate by 4% per year, find the change in the nominal interest rate Ai C) Suppose the growth rate of Y falls to 2% per year. What will happen to inflation? What must the central bank do if it wishes to keep inflation constant?
According to the long-run relationship between money growth, income growth, and the change in the price level, if European inflation is higher than U.S. inflation but money growth is the same, it must be that: a) real income growth in Europe and the United States is the same. b) real income growth in Europe is larger than real income growth in the United States. c) real income growth in the United States is higher than in Europe. d) the level of nominal income is higher in Europe than in the United States.
The aggregate economy of India has a rate of money growth equal to 7. Initially the velocity of money is not changing. The long-run aggregate supply curve equals 2 But then there is a banking panic, causing the growth rate of the velocity of money to fall to -6 percent per year. In the absence of government intervention, the resulting recession would last for 3 years (meaning it would grow at the recession growth rate for 3 years, then return to long-run equilibrium after that). Assume that just before the recession started, India's level of GDP was equal to $100 billion. Your boss has proposed that the government should step in and use fiscal policy to end the recession immediately. But Raj Kumar, a member of the opposition, has claimed that fiscal policy is too expensive, and anyways there is no reason to end the recession because it will end on its own. To counter his argument, your boss has asked you to calculate how much lower GDP would be by the end of the recession if the…
An IS curve shows: (a) that realized savings are most likely a function of interest rates, because changes in interest rates result in changes in precautionary demand for money; (b) the combinations of investments and incomes that result in the supply and demand for money being equal to one another; (c) the locus of all combinations of interest rates and incomes that will result in realized investment and realized savings being equal to one another; (d) that increases in output typically are caused by increases in interest rates.
28) When the Fed raises the federal funds rate A) the value of the dollar rises on the foreign exchange market. B) consumption increases. C) net exports increase. D) the value of the dollar falls on the foreign exchange market. 29) An inflation rate targeting rule A) reduces uncertainty about monetary policy. B) means that the inflation rate must exceed 5 percent in order for the rule to be effective. C) has been adopted the by the Fed in response to the financial crisis of 2008-2009. D) will not work if the Fed continues to sue open market operations.
Volatility in the growth rate of real GDP subsided in the 40 years after 1980. One key reason for the relative decline in volatility is that: (a) the Fed became more adapt at keeping the inflation rate stable; (b) the Fed continuously implemented aggressive monetary easing; (c) the Fed continuously implemented monetary tightening; (d) the value of the U.S. dollar in foreign exchange markets rose persistently.
According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? a) innovations relating to banking and finance b) unpredictable rises and falls in nominal GDP c) quantity of credit rises above where it otherwise be 4. d) monetary policy will become inevitably imprecise
In general, when there is less competition in the banking sector ( a lower supply of firms), nominal interests rates decrease, which makes it easier for business owners to obtain a loan. inflation decreases, which is better for the economy as a whole. nominal interest rates increase, which is good for businesses. nominal interest rates increase, making it more difficult for business owners to obtain loans, which is bad for the economy as a whole.