"Inflation reduces the velocity of money because people reduce their money holdings." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?
The statement is incorrect. As the inflation rate rises, people reduce their money holdings by spending money more rapidly. As a result, the velocity rises rather than falls.
You might also like to view...
If the quantity of corn is such that the marginal cost of corn is greater than the marginal benefit of corn, then I. there is a deadweight loss. II. more than the efficient quantity of corn is produced
A) Only I is correct. B) Only II is correct. C) Both I and II are correct. D) Neither I nor II is correct.
Which of the following describes how a negative externality affects a competitive market?
A) The externality causes a difference between the private cost of production and the private benefit from consumption. B) The externality causes consumer surplus to exceed producer surplus. C) The externality causes a difference between the private cost of production and the equilibrium price. D) The externality causes a difference between the private cost of production and the social cost.
Trade between two nations is complicated by
a. the variability in exchange rates of the respective nation's currencies. b. different production techniques in the nations. c. the age and experience of the respective nation's diplomats. d. the variability in climate between the nations.
More than three-fourths of the unemployed are recent entrants into the labor force
a. True b. False Indicate whether the statement is true or false