Q.1. i. Using the Quantity Theory of Money expressed by the relation Ms*V = P*Y assume that velocity is constant and output is at full capacity Yf (full employment and full machine utilisation A. Then a decrease in inflation rates can only follow from money supply Ms expansion B. An increase in inflation can only follow from money supply Ms expansion C. Keynesian economists hold that this is the “normal” situation of the economy D. Any increase in money supply has to be accommodated by a proportional decrease in velocity, to keep output constant at full capacity
Q.1.
i. Using the Quantity Theory of Money expressed by the relation Ms*V = P*Y assume that velocity is constant and output is at full capacity Yf (full employment and full machine utilisation
A. Then a decrease in inflation rates can only follow from money supply Ms expansion
B. An increase in inflation can only follow from money supply Ms expansion
C. Keynesian economists hold that this is the “normal” situation of the economy
D. Any increase in money supply has to be accommodated by a proportional decrease in velocity, to keep output constant at full capacity
ii. Bank notes became money
A. When people realized that bank notes were indeed redeemable by the holder into the gold deposits previously made by the banknote holders
B. When central banks decided to back those notes becoming a lender of last resort
C. When governments declared them legal tender
D. When a minimum reserve ratio was established to provide security in the deposits of gold
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