PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 10, Problem 6RQ
To determine
Explain why money growth and inflation tend to be closely linked in terms of quantity equation.
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Over the past 12 years, Zambia has experienced an inflation rate of 9.8% per year. What does this suggest about the growth of Zambia's money stock according to the Quantity Theory of Money?
Zambia's money stock has decreased by 9.8 percent per year over the past 12 years.
Zambia's money stock has increased by 0.817 percent per year over the past 12 years.
Zambia's money stock has increased by 9.8 percent per year over the past 12 years.
Zambia's money stock has decreased by 0.817 percent per year over the past 12 years.
Explain why this following statement is true or false?
a) Decreasing inflation rate and increasing purchasing power are caused by too many amount of money in circulation.
Based on Keynesian economic theory, which of the following will occur if the Central Bank increases the money supply?
Select one:
The price level will rise while the real rate of interest and the level of investment remains unchanged
The real rate of interest will fall and as such investment will increase
Aggregate demand will fall as prices rise
The nominal rate of interest will fall but the real rate of interest will also fall as the price level falls. As a result, investment remains unchanged
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PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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