The empirical evidence on the velocity of money, specifically M2, shows it to be relatively stable over the long run. Does this imply that monetary policymakers really should focus on the growth rate of money for economic stability?
What will be an ideal response?
Not really. While it is true that over the long run the velocity of M2 appears stable, it does experience significant short run volatility and policymakers tend to have a relatively short-run focus. With the focus for policymakers being relatively short, changes in velocity can have enormous impacts on inflation in the short run as well as other economic variables.
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The purchase of 500 shares of Honda stock by the California State Employees' Pension fund
A) is counted as consumption expenditure. B) is not counted as part of GDP. C) is counted as investment in the GDP accounts. D) is counted as part of export expenditure in the GDP accounts because Honda is a foreign firm. E) is counted as part of import expenditure in the GDP accounts because Honda is a foreign firm.
The open interest on calls __________ the open interest on puts
A) is always equal B) is always larger C) is always smaller D) has no direct relationship with
A cost of living adjustment (COLA)
a. changes wages by the same percentage every year. b. decreases wages by the inflation rate. c. increases wages by the inflation rate. d. changes prices of consumer goods by the inflation rate.
Economies of scale tend to create natural monopolies.
Answer the following statement true (T) or false (F)