Suppose the annual rate of inflation has been 3 percent and the annual growth rate of the money supply has been 5 percent during the last few years. In the last twelve months, however, the monetary authorities have increased the money supply at a 12 percent annual rate. The expected inflation rate for the next period will be:
a. lower than 3 percent under both the adaptive and rational expectations hypotheses.
b. 3 percent under the adaptive expectations hypothesis.
c. 3 percent under the rational expectations hypothesis.
d. higher than 3 percent under both the adaptive and rational expectations hypotheses.
B
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An increase in the money supply will cause the nominal interest rate to ________ and the quantity of money to ________
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
The ease with which an asset can be converted into a medium of exchange is:
a. currency convertibility. b. asset convertibility. c. convertibility. d. money convertibility. e. liquidity.
Cashing out capital gains in Virtual Currency System #3 (i.e., turning virtual capital gains into real world currencies) causes the nation's:
a. Monetary base to rise. b. M2 money supply to rise. c. M2 money supply to remain the same. d. M2 money supply to fall.
Efficiency is illustrated by
a. both the production possibilities frontier and the circular-flow diagram. b. neither the production possibilities frontier nor the circular-flow diagram. c. the production possibilities frontier only. d. the circular-flow diagram only.