Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 5CQQ
To determine

Money growth, quantity theory of money, and Fisher effect.

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What is the demand for​ money?   When the nominal interest rate​ rises, does the opportunity cost of holding money increase or​ decrease? Does the quantity of money demanded increase or​ decrease? The demand for money is the relationship between the quantity of money demanded and the​ _______ when all other influences on the amount of money that people wish to hold remain the same.     A. price of bonds   B. real interest rate   C. inflation rate   D. nominal interest rate   When the nominal interest rate​ rises, the opportunity cost of holding money​ _______ and the quantity of money demanded​ _______.     A. ​falls; increases   B. ​rises; decreases   C. ​falls; decreases   D. ​rises; increases
Milton Friedman argued that the Fed's control over the money supply could be used to peg   a. the level of a nominal or real variable, but not the growth rate of a real or nominal variable.   b. the level or growth rate of a real variable, but not the level or growth rate of a nominal variable.   c. the level or growth rate of a nominal variable, but not the level or growth rate of a real variable.   d. both levels and growth rates of both real and nominal variables.
According to the quantity theory of money and theFisher effect, if the central bank increases the rateof money growth, thena. inflation and the nominal interest rate bothincrease.b. inflation and the real interest rate both increase.c. the nominal interest rate and the real interestrate both increase.d. inflation, the real interest rate, and the nominalinterest rate all increase.
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