If velocity and output were nearly constant, Select one:

If velocity and output were nearly constant,

Select one:

a. the inflation rate would be much higher than the money supply growth rate.

b. the inflation rate would be about the same as the money supply growth rate.

c. the inflation rate would be much lower than the money supply growth rate.

d. any of the above would be possible.

Expert Solution

According to the quantity theory of money, the equation of exchange is written as follows

PY = MV where

P = Price level; Y = Real GDP; M = Money supply, V = Velocity of money

The percentage change form of the equation can be written as:

% change in P + % change in Y = % change in M + % change in V

If velocity and output are constant, % change in V = % change in Y = 0

=> % change in P + 0 = % change in M + 0

=> % change in P = % change in M

% change in P = Inflation rate = % change in M = Money supply growth rate

Ans: b. the inflation rate would be about the same as the money supply growth rate

Rahul Sunny answered 2 years ago

If velocity (V) and aggregate output (Y) remain constant at $4 and $1,250 billion, respectively

If velocity (V) and aggregate output (Y) remain constant at $4 and $1,250 billion, respectively, what happens to the price level (P) if the money supply (M) declines from $475 billion to $375 billion?

If velocity (V) and aggregate output (Y) remain constant at $5 and $1,250 billion, respectively, what...

If velocity (V) and aggregate output (Y) remain constant at $5 and $1,250 billion, respectively, what happens to the price level (P) if the money supply (M) declines from $425 billion to $325 billion? Originally, the price level is nothing. (Round your response to two decimal places.) After the money supply decreases, the price level is

In a velocity selector particles having velocity greater than passe without defliction Select one: True False

In order for an object of constant mass to be traveling with constant velocity, which of...

In order for an object of constant mass to be traveling with constant velocity, which of the following must be true? a. the net force acting on the mass must be zero b. it’s acceleration is constant c. the net force acting on the mass is greater than zero d. none of the above

Assume an airplane flew horizontally with a constant velocity and dropped one bale of hay every...

Assume an airplane flew horizontally with a constant velocity and dropped one bale of hay every two seconds to a herd of cattle below. If the air resistance can be ignored, (a) what is the motion of the bales as relative to the ground? (b) what is the motion of the bales as relative to the airplane? (c) As the bales are falling through the air, will their distance of separation before hitting the ground increase, decrease or remain constant?

A seller produces output with a constant marginal cost MC = 24. Suppose there is one...

A seller produces output with a constant marginal cost MC = 24. Suppose there is one group of consumers with the demand curve P1 = 80 − 2Q1, and another with the demand curve P2 = 60 − 3Q2. (a) If the seller can discriminate between the two markets, what prices would she charge to each group of consumers? (b) If the seller cannot discriminate, but instead must charge a uniform price to consumers in both markets, what will be...

A seller produces output with a constant marginal cost MC = 2. Suppose there is one...

A seller produces output with a constant marginal cost MC = 2. Suppose there is one group of consumers with the demand curve P1 = 16 - Q1, and another with the demand curve P2 = 10 - (1/2)Q2. a) If the seller can discriminate between the two markets, what prices would she charge to each group of consumers? b) If the seller cannot discriminate, but instead must charge the same price P1 = P2 = P to each consumer...

In an RC circuit the time constant is defined as Select one: True False

1.According to the quantity equation, if velocity is constant at 2 and real GDP is constant...

1.According to the quantity equation, if velocity is constant at 2 and real GDP is constant at 6000, then, if the money supply is increased from 4500 to 6000, the price level: A. increases to 1.33 B. increases to 1.5 C. increases to 2 D. is constant at 1.5 2. If inflation does not adjust rapidly in the short run, then when the Reserve Bank increases the nominal interest rate, in the short run the real interest rate will: A....

Which of the following statements is most correct? Select one: a. The constant growth model is...

Which of the following statements is most correct? Select one: a. The constant growth model is often appropriate for companies that never pay dividend. b. The constant growth model can be applied to companies that expect zero dividend growth rate. c. The constant growth model is inappropriate for mature companies with a stable history of growth. d. The constant growth model is often appropriate for companies that the dividend growth rate is larger than its required rate of return on...

Question