Question

If a country had a money stock of $100 billion, a real GDP of 500 billion, and a price level of $2, then velocity would be 10.

a. True b. False

The monetary effects of buying or selling domestic bonds are very different than buying or selling foreign bonds.

True or False

The Fed, working with Treasury, has the power to buy assets dominated in foreign currency, but it does not have the power to sell them.

True or false

Purchases and sales of foreign currency by a country’s central bank affects neither the money stock nor the exchange rate of the country’s currency.

True or false

If the Fed were to buy euro-dominated bonds, the exchange rate of the euro would tend to strengthen relative to the dollar.

True or false

When a consumer withdraws cash through an ATM machine, the total money stock decreases.

True or Flase

Answer 1

Question 1

Money stock = $100 billion

Real GDP = 500 billion

Price level = $2

As per the Quantity theory of money,

Money stock * Velocity = Real GDP * Price level

$100 billion * Velocity = 500 billion * $2

$100 billion * Velocity = $1,000 billion

Velocity = $1,000 billion/$100 billion = 10

So,

The velocity would be 10.

Thus,

The given statement is True.