Question : 21) The quantity theory of money can be written as A) : 1381254

 

21) The quantity theory of money can be written as

A) MV = PY.

B) M/V = PY.

C) MV = P/Y.

D) MP = VP.

 

22) Velocity is NOT constant if

A) the money supply does not depend on the interest rate.

B) the supply of money depends on the interest rate.

C) the price level increases as aggregate output increases.

D) the demand for money depends on the interest rate.

 

23) If the demand for money depends on the interest rate, velocity is

A) not constant, and the quantity theory of money does hold.

B) not constant, and the quantity theory of money does not hold.

C) constant, and the quantity theory of money does not hold.

D) constant, and the quantity theory of money does hold.

 

24) If the equation for the quantity theory of money is looked on as a demand-for-money equation, then the demand for money depends on

A) nominal income but not on the interest rate.

B) nominal income and the interest rate.

C) real income but not on the interest rate.

D) real income and the interest rate.

25) If the demand for money depends on the interest rate, then a 15% increase in the money supply will increase

A) nominal GDP by 15%.

B) nominal GDP by less than 15%.

C) nominal GDP by more than 30%.

D) real GDP by 30%.

 

26) Assume that the demand for money depends on the interest rate. A decrease in the money supply will cause

A) the interest rate to increase, the quantity demanded of money to decrease, and the velocity of money to decrease.

B) the interest rate to increase, the quantity demanded of money to decrease, and the velocity of money to increase.

C) the interest rate to decrease, the quantity demanded of money to decrease, and the velocity of money to increase.

D) the interest rate to decrease, the quantity demanded of money to increase, and the velocity of money to decrease.

 

27) Which of the following statements is NOT consistent with the quantity theory of money?

A) The velocity of money can be affected by how frequently workers are paid.

B) The velocity of money can be affected by the development of new financial instruments, such as interest-bearing checking accounts.

C) The velocity of money can be affected by the manner in which the banking system clears transactions between banks.

D) Velocity can change with changes in the interest rate.

28) Velocity will be constant if the demand for money with respect to the interest rate is

A) unitary elastic.

B) perfectly inelastic.

C) perfectly elastic.

D) elastic, but not perfectly elastic.

 

29) Empirical evidence suggests that from 1960 until 2007, the velocity of money had, on average, been

A) constant.

B) decreasing.

C) rising.

D) fluctuating around zero.

 

30) Which of the following is TRUE?

A) Measuring money supply using M2 reduces fluctuations in velocity.

B) Measuring money supply using M1 reduces fluctuations in velocity.

C) Measuring money supply using M2 increases fluctuations in velocity.

D) Velocity does not depend on which money supply measurement we use.

 

 

 

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