Question

QUESTION 10

1. According to the quantity theory of money, if the money supply, M, increases by 10%, then

   	A.	velocity increases by 10%.
   	B.	the rate of inflation (in %) increases by 10.
   	C.	the nominal GDP increases by 10%.
   	D.	none of the above.

10 points   

QUESTION 11

1. According to the quantity theory of money and the classical model, changes in nominal money supply, M, has

   	A.	no effect on real variables.
   	B.	no effect on inflation rate.
   	C.	no effect on nominal interest rate.
   	D.	none of the above.

10 points   

QUESTION 12

1. If the nominal interest rate is 4% while the rate of inflation is 1%, then the real interest rate is

   	A.	0%.
   	B.	1%.
   	C.	2%.
   	D.	none of the above.

10 points   

QUESTION 13

1. According to the quantity theory of money and the classical model, if money supply, M, increases by 1%, then

   	A.	the real interest rate (in %) increases by 1.
   	B.	the inflation rate (in %) increases by 1.
   	C.	the nominal interest rate (in %) increases by 2.
   	D.	none of the above.

10 points   

QUESTION 14

1. The opportunity cost of holding money (demand for money) is

   	A.	real interest rate.
   	B.	nominal interest rate.
   	C.	inflation rate.
   	D.	none of the above.

Answer 1

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Queslo? & Tmi mus PY of. in Increases by 10% then dece to One to one relationship between Price and proney Hence Supply & suflation is 10% Hence option ® is Correct Quest1: option A is Cosseet Increase in in leads to no change in real variable Ques 120 Hominal guterest rate (:) = 4% rate of suflation (2) L% real Interest rate (2) i Ft 4- = 3% Option D is Correct Queslag Option option ® is correcti af m Increases by 1% Price level will also Increase by ly is 1 % suflaten seule option ® is correct Ouest Nominal Interest rate is opportunity cost q CS scanned with CamScanner to holding money