Suppose velocity is constant, but real GDP is not independent of the money supply. If this is the case, a 10 percent increase in the money supply will:
A. have an unpredictable effect on inflation.
B. raise inflation by less than 10 percent.
C. raise inflation by more than 10 percent.
D. raise inflation by 10 percent.
Answer: A
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"All available information" in the definition of rational expectations means that
a. agents use all possible information that could be out there. b. agents use all possible public information that could be out there. c. agents use all information that is relevant. d. agents use all information that is available in which the marginal benefits of the information are greater than the marginal costs of gathering the information.
The percentage of retired older workers has increased dramatically since the introduction of Social Security.
A. True B. False C. Uncertain
Full employment is the rate of employment that results when:
a. all the labor resources of the economy are employed full time. b. cyclical unemployment has reached its maximum. c. everybody who wants a job can find one. d. only frictional and structural unemployment are present.
Anna and Howard both own 100 shares of Photo-Hut. Anna buys stocks for income for current consumption, Howard buys stocks for their future growth. This year the firm has paid out all its profits to its stockholders. We can expect that
a. Anna and Howard will both spend the income. b. Howard will spend the income, while Anna will use the money to buy more stock in the firm. c. Howard will sell the stock since it is not reinvesting its profits. d. Anna will spend the income, while Howard will use the money to buy more stock in the firm.