The quantity theory of money implies that a 7% increase in the ________ will eventually cause a 7% increase in the ________.
A. money demand; money supply
B. money supply; price level
C. money demand; inflation rate
D. money supply; money demand
Answer: B
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In open market operations, when the Fed __________ securities, bank reserves __________
A) buys; contract B) buys; expand C) sells; expand D) None of the above.
Suppose the income-consumption curve for goods X and Y is upward sloping. If the price of good Y increases and the income-consumption curve rotates in clockwise fashion, then we know that:
A) X and Y are complements. B) X and Y are both inferior goods. C) X and Y are substitutes . D) Y is an inferior good.
The Scarcity Principle is an economic theory in which a limited supply of a good, coupled with a high demand for that good, results in a mismatch between the desired supply and demand equilibrium.
Indicate whether the statement is true or false.
The opportunity cost of capital is
A. a part of economic profits. B. the normal rate of return. C. an explicit cost. D. usually unknown and must be estimated by looking at the price of capital goods.