Attempt the following multiple choice questions:1. The velocity of money represents:(a) Whether individuals are increasing or decreasing the quantity of money spent in aneconomy(b) The quantity of money available in an economy(c) The level of prices determined by the equation of exchange(d) How often money is used in a specific period of time(e) Whether currency is accepted as a medium of exchange in an economy2. According to the quantity theory of money,(a) Increases in the money supply will lead to inflation, ceteris paribus(b) The level of inflation is independent of the money supply(c) The money supply times the velocity equals the real GDP(d) When real GDP rises, the money supply must fall by the same proportion(e) The velocity of money is assumed to fluctuate widely over time3. Monetarists differ from Classical economists in their view of money in that monetaristsbelieve:(a) The velocity of money is relatively constant over time(b) Prices are not influenced by real GDP(c) Prices are not influenced by the money supply(d) The level of unemployment is directly related to the money supply(e) The velocity of money varies over time4. According to classical economists:(a) Individuals wish to hold money only as a precaution(b) Individuals do not hold money for either precautionary or speculative reasons(c) The velocity of money is not constant but is predictable(d) The velocity of money is not constant and cannot be predicted with any degree ofcertainty(e) Individuals have no reason for wanting to hold money5. The speculative demand for money suggests that:(a) Individuals hold onto money for the purpose of engaging in transactions(b) As the rate of interest rate increases, the demand for money will rise(c) When the economy becomes more uncertain, people are more likely to hold unto money(d) The velocity of money is constant(e) As the rate of interest falls, the demand for money will rise.

Since you have asked multiple questions, we will solve the first 3 parts of the question for you. If…

1. The velocity of money represents: (a) Whether individuals are increasing or decreasing the quantity of money spent in an economy (b) The quantity of money available in an economy (c) The level of prices determined by the equation of exchange (d) How often money is used in a specific period of time (e) Whether currency is accepted as a medium of exchange in an economy

1. The velocity of money represents: (a) Whether individuals are increasing or decreasing the quantity of money spent in an economy (b) The quantity of money available in an economy (c) The level of prices determined by the equation of exchange (d) How often money is used in a specific period of time (e) Whether currency is accepted as a medium of exchange in an economy

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 3.7P

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