2) How is the quantity theory of money different from the quantity equation, and why must...
2) How is the quantity theory of money different from the quantity equation, and why must the quantity equation always be true?
Homework Answers
The quantity theory of money states that the variations in price level relate to variation in the money supply. Alternatively, we can say that the changes in the general price level due to changes in the money supply. The quantity theory of money is always correct because the velocity of money is defined as (p*y)/m. In this equation the velocity of money is constant. The constant Fisher states that the average number of times the dollar spent that does not change when people get paid.
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2) How is the quantity theory of money different from the
quantity equation, and why must...
the quantity theory of money is QUESTION 35 The quantity theory of money is likely to...
the quantity theory of money is
QUESTION 35 The quantity theory of money is likely to hold in the short run. no longer holds for high-inflation countries. is likely to hold in the long run. always holds for high-inflation countries.
1) Show the quantity equation. Calculate velocity of money for each year. (3 points) 2) Can...
1) Show the quantity equation. Calculate velocity of money for
each year. (3 points)
2) Can you turn quantity equation into the quantity theory of
money? Why? Or Why not? (2 points)
3) Calculate an inflation rate from 2019 to 2020 by using the
quantity theory of money equation, which means that percentage
change in price level is equal to money growth rate minus economic
growth rate. (2 points)
Year Money Supply (Trillions) Price Level (GDP deflator) Real GDP (Trillions)...
Explain how the two formulation of the quantity theory are formally equivalent. Why cambridge equation is...
Explain how the two formulation of the quantity theory are formally equivalent. Why cambridge equation is considered to be more close to the modern theory.
4. Money growth and inflation. Use the quantity theory of money to answer the following questions...
4. Money growth and inflation. Use the quantity theory of money to answer the following questions (a) (3 points) Assuming that the velocity of money is constant, if a country has an average annual growth rate of real GDP equal to 6%, then what is the average annual rate of money growth that would required to produce an average rate of inflation of 3%? Show your work. (b) (3 points) True or false: According to the quantity theory of money,...
According to the quantity theory of money, in the long run
According to the quantity theory of money, in the long run A. an increase in the quantity of money creates an increase in real GDP B. the quantity of money in a society will always be just the right amount. C. an increase in the quantity of money creates an increase in prices but no additional increase in real GDP D. None of the above answers are correct.
Question 2. (12 marks) The quantity theory of money states that the quantity of money available...
Question 2. (12 marks) The quantity theory of money states that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate. Using an appropriate diagram, explain the adjustment process in the case of decrease in the money supply.
a. Write down the quantity theory of money and explain it. b. According to the Keynesian...
a. Write down the quantity theory of money and explain it. b. According to the Keynesian theory of money demand ( liquidity preference), the velocity of money will not be fixed. Derive the equation of velocity under the liquidity pref erence and explain why the velocity will NOT be fixed any more. c. According to the portfolio theories of money demand, what are the four factors that determine money demand? What changes in these factors can increase the demand for...
1. Friedmania is a country in which the quantity theory of money operates. The country has...
1. Friedmania is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology so real GDP does not change. In 2008 real GDP was S500 mllon, the price level, measured by the GDP deflator, was 150 and the velocity of circulation of money was 10. (Because the price level is measured by the GDP deflator, it must be divided by 100 before it is used in the equation of exchange.)...
What does the evidence from hyperinflations indicate with respect to the quantity theory of money? Evidence...
What does the evidence from hyperinflations indicate with respect to the quantity theory of money? Evidence shows that money growth and inflation moved together, which supports the quantity theory Evidence shows that money growth and inflation moved together, which does not support the quantity theory Evidence shows that money growth and inflation did not move closely with each other, which supports the quantity theory Evidence shows that money growth and inflation did not move closely with each other, which does...
What does the evidence from hyperinflations indicate with respect to the quantity theory of money? (1...
What does the evidence from hyperinflations indicate with respect to the quantity theory of money? (1 mark) a. Evidence shows that money growth and inflation moved together, which supports the quantity theory. b. Evidence shows that money growth and inflation moved together, which does not support the quantity theory. c. Evidence shows that money growth and inflation did not move closely with each other, which supports the quantity theory. d. Evidence shows that money growth and inflation did not move...
the quantity theory of money is
QUESTION 35 The quantity theory of money is likely to hold in the short run. no longer holds for high-inflation countries. is likely to hold in the long run. always holds for high-inflation countries.
1) Show the quantity equation. Calculate velocity of money for
each year. (3 points)
2) Can you turn quantity equation into the quantity theory of
money? Why? Or Why not? (2 points)
3) Calculate an inflation rate from 2019 to 2020 by using the
quantity theory of money equation, which means that percentage
change in price level is equal to money growth rate minus economic
growth rate. (2 points)
Year Money Supply (Trillions) Price Level (GDP deflator) Real GDP (Trillions)...
4. Money growth and inflation. Use the quantity theory of money to answer the following questions (a) (3 points) Assuming that the velocity of money is constant, if a country has an average annual growth rate of real GDP equal to 6%, then what is the average annual rate of money growth that would required to produce an average rate of inflation of 3%? Show your work. (b) (3 points) True or false: According to the quantity theory of money,...
Question 2. (12 marks) The quantity theory of money states that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate. Using an appropriate diagram, explain the adjustment process in the case of decrease in the money supply.
1. Friedmania is a country in which the quantity theory of money operates. The country has a constant population, capital stock, and technology so real GDP does not change. In 2008 real GDP was S500 mllon, the price level, measured by the GDP deflator, was 150 and the velocity of circulation of money was 10. (Because the price level is measured by the GDP deflator, it must be divided by 100 before it is used in the equation of exchange.)...
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