Quiz 7

the money supply growing faster than real GDP

according to the quantity theory of money inflation is caused by

money supply grows at a slower rate than real GDP

according to the quantity theory of money, deflation will occur if the

6%

according to the quantity theory of money, if the money supply grows at 6%, real gdp grows at 2% and the velocity of money is constant, then inflation will be?

Mo

currency and reserves

decrease not change

if a person takes $100 from his/her bank at home and puts it in his/her savings account then M1 will _______ and M2 will ___________

the velocity of money was fixed

the quantity theory of money was derived from the quantity equation asserting that

in the long run, but not in the short run

there is a strong link between changes in the money supply in inflation

money makes exchange easier, leading to more specialization and higher productivity

what is one of the most important benefits of money in an economy?

M2

M1 + savings deposit and individual money market account

M1

Mo + Demand deposits (checking account)

fiat money

little to no intrinsic value and is authorized by the central bank or governmental body

a large government budget deficits

one of the main reasons for hyperinflation episode is ...

borrowers will have to pay increasing amounts in real terms overtime

your roommate argues that he can think of no better situation than living in deflationary economy, as prices of goods and services would continuously fall. you disagree and argue that during a deflation, people can be made worse off because .....