(A) Explain the “Quantity Theory of Inflation" and show how you can use this theory to predict the inflation rate.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter7: Unemployment And Inflation
Section: Chapter Questions
Problem 4.10P
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Question (2)
(A)
Explain the "Quantity Theory of Inflation" and show how you can use this theory to predict
the inflation rate.
(B)
Explain how the folowing events will affect the demand for money according to the portfolio
theories of money demand:
(i) A new Web site allows you to liquidate your bond holdings quickly and cheaply.
(ii) Aglobal financial crisis is coming.
Transcribed Image Text:Question (2) (A) Explain the "Quantity Theory of Inflation" and show how you can use this theory to predict the inflation rate. (B) Explain how the folowing events will affect the demand for money according to the portfolio theories of money demand: (i) A new Web site allows you to liquidate your bond holdings quickly and cheaply. (ii) Aglobal financial crisis is coming.
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