Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 30, Problem 3CQQ
To determine
The most stable variable according to the quantity theory of money.
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According to the quantity theory of money,
a. V and M are constant.
b. V and Y are not affected by the quantity of money.
c. V and P are not affected by the quantity of money.
d. V and M are not affected by changes in the price level.
Explain the quantity theory of money and explain how the money demand, money supply, and quantity of money are related to each other? Which variable (s) will be affected if the money supply increases in the economy? Take in context to what has been happening in the U.S economy in the past few years.
Using the quantity theory of money with a fixed money supply, increases in the transactions demand for money can only be satisfied by ____________. Group of answer choices
A. increases in the velocity of money
B. decreases in the velocity of money
C. decreasing investment
Chapter 30 Solutions
Principles of Economics (MindTap Course List)
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- The quantity theory of money has which of the following implications?When the money supply grows faster than potential output, there is deflationIs based on the idea that monetary policy can affect the unemployment rate in the long runA central bank can increase the velocity of moneyNone of the abovarrow_forwardthe shift of money curve depends on all of the following except A. income B.the price level C. the interest rate D.inflationarrow_forwardWhen the money market is depicted in a diagram with the value of money on the vertical axis, what would shift money demand to the left? a. an increase in the price level b. a decrease in the price level c. a decrease in real GDP d. an increase in real GDP ہےarrow_forward
- A) What is the notable insight of the Quantity Theory of money? (a) An Increase in the quantity of money, ceteris paribus will result in inflation (b) A decrease in the quantity of money, ceteris paribus will result in inflation (c) An Increase in the quantity of goods and services, ceteris paribus will result in inflation (d) An Increase in the demand for money holding, ceteris paribus will result in inflation B) What is the primary purpose of the interest rate in Bagehot's rule? (a) To increase the revenue of the government (b) To decrease uncertainity (c) To eliminate moral hazard (d) To increase the revenue of the central bankarrow_forwardAccording to the quantity theory of money, if there is a significant increase in money supply there will be an increase in the a. Unemployment rate b. Loanable funds market c. Price level d.Real interest ratearrow_forwardAccording to the quantity theory of money, if there is a significant increase in money supply there will be an increase in the a. Unemployment rate b. Loanable funds market c. Price level d. Real interest ratearrow_forward
- Explain the quantity theory of money and the effects of an expansion of the money supply. Does the empirical evidence support the idea that the income-velocity of money is constant?arrow_forwardIf there is a shortage of money in the economy, then : A. The purchasing power of money will tend to fail B. The prices will tend to rise C. The economy will fall into a recession D. The real money supply (m/p) will increasearrow_forwardIn the money market, the y axis of the coordinate plane is which variable below? a.Interest rate b.Wage c.Price d.Velocity of moneyarrow_forward
- Based on these motives, what variables did he think determined the demand for money? (Check all that apply.) A. Nominal interest rate. B. Income. C. Price level. D. The risk of losing money.arrow_forwardFiat money is Select one: a.money backed by gold or some other precious metal. b.commodity money like salt. c.valuable only because some authority decrees it to be. d.the name given to Italian lira when it is falling in value. One of the impacts of inflation is Select one: a.the real value of money falls. b.wealth is transferred from borrowers to savers. c.an increase in speculative holdings of cash. d.higher real interest rates.arrow_forwardShow and explain the effects of an increase in Price level in money marketarrow_forward
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