Make use of the quantity theory of money to solve the following problem
If the Fed has an inflation target of 2% and the velocity of money is constant, by how much should it increase the money supply each year if economic growth is expected to average 3%?
Since the percent change in the money supply equals the percent change in real GDP plus inflation, the money supply should grow by 2% + 3% = 5%.
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Refer to Figure 15-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, the Federal Reserve would most likely
A) increase the inflation rate. B) decrease interest rates. C) not change interest rates. D) increase interest rates.
The CPI does not reflect the increase in the value of the dollar that arises from the introduction of new goods
a. True b. False Indicate whether the statement is true or false
What happened that was unusual during the 1980s?
a. Debt soared due to a war. b. Debt soared during a time of peace. c. Debt plummeted due to a recession. d. Debt plummeted due to tax increases.
Suppose the supply of labor schedule increases in a perfectly competitive labor market while the market demand schedule remains unchanged. A profit-maximizing representative firm will
A. hire the same number of workers. B. substitute capital for labor. C. hire fewer workers. D. hire more workers.