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Questions and Answers
What determines the demand for money according to the text?
What determines the demand for money according to the text?
- Level of transactions and institutions in the economy (correct)
- Institutions in the economy only
- Level of nominal income only
- Quantum of taxes imposed
What leads to a proportional change in the price level?
What leads to a proportional change in the price level?
- Changes in interest rates
- Changes in the quantity of money (correct)
- Changes in aggregate output
- Changes in velocity
What do classical economists, including Fisher, believe about wages and prices?
What do classical economists, including Fisher, believe about wages and prices?
- Dependent on government regulations
- Constant and inflexible
- Completely flexible (correct)
- Irrelevant to economic theory
How does an increase in money supply affect the price level?
How does an increase in money supply affect the price level?
What remains fairly constant in the short run according to the Quantity Theory of Money discussed in the text?
What remains fairly constant in the short run according to the Quantity Theory of Money discussed in the text?
Which factor predominantly affects changes in the price level according to Quantity Theory of Money?
Which factor predominantly affects changes in the price level according to Quantity Theory of Money?
The equation of exchange states that the quantity of money multiplied by the what must be equal to nominal income?
The equation of exchange states that the quantity of money multiplied by the what must be equal to nominal income?
If people begin to use credit cards more frequently for transactions instead of cash, what is the likely impact on velocity according to the text?
If people begin to use credit cards more frequently for transactions instead of cash, what is the likely impact on velocity according to the text?
What would happen to nominal income if money supply (M) increases but velocity (V) decreases?
What would happen to nominal income if money supply (M) increases but velocity (V) decreases?
How are institutions affecting transactions related to the determinants of velocity according to the text?
How are institutions affecting transactions related to the determinants of velocity according to the text?
Which of the following best represents an example of the quantity theory of money, as explained in the text?
Which of the following best represents an example of the quantity theory of money, as explained in the text?
In the short run, how does the text suggest that changes in institutional and technological features of the economy impact velocity?
In the short run, how does the text suggest that changes in institutional and technological features of the economy impact velocity?
What does Fisher's view that velocity is fairly constant in the short run transform the equation of exchange into?
What does Fisher's view that velocity is fairly constant in the short run transform the equation of exchange into?
If the quantity of money M doubles according to the quantity theory of money, what happens to nominal income (P x Y)?
If the quantity of money M doubles according to the quantity theory of money, what happens to nominal income (P x Y)?
What does the quantity theory of money state is determined solely by movements in the quantity of money M?
What does the quantity theory of money state is determined solely by movements in the quantity of money M?
How is the demand for money interpreted in terms of Fisher's quantity theory?
How is the demand for money interpreted in terms of Fisher's quantity theory?
How are transactions generated in relation to the quantity of money demanded (Md)?
How are transactions generated in relation to the quantity of money demanded (Md)?
According to Fisher's view on the demand for money, what factor does not affect the demand for money?
According to Fisher's view on the demand for money, what factor does not affect the demand for money?
