Question

The equation of exchange ________. A) states that the quantity of money multiplied by velocity must equal nominal income in a given year B) describes a relationship that is true by definition C) shows that real GDP must equal real money balances times the number of times a dollar turns over in a year D) all of the above E) none of the above

Answer #1

The equation of exchange is given below:

M x V = P x Y.

It is M multiply by V equal to P multiply by Y.

Where, M is quantity of money

V is velocity of money.

P is price level.

Y is real GDP

And, P x Y is nominal GDP (income).

From the above equation we can say that nominal income is equal to the quantity of money multiplied by velocity.

Or, we can also conclude that real GDP (Y) must equal to real money balance (M/P) times the number of times a dollar turns over in a year (V).

Or, it describe a relationship that is true by definition.

So, the correct answer is an option (D). i.e., all of the above.

Which of the following is not the quantity equation of
money?
Select one:
a. Money Supply x Velocity = Price Level x Real GDP
b. Velocity = Nominal GDP / Money Supply
c. Nominal GDP = Money Supply x Velocity
d. Real GDP = Money Supply x Velocity

Consider the equation of exchange (Quantity Theory of Money).
Imagine that it is true that velocity is fixed. Show that money
demand does not depend on interest rates. If this is true, draw a
graph of Money Demand.

1. Recall the classical economists and one of their
favorite theories: the quantity theory of money and monetary
neutrality. The theory is expressed as an equation as follows: M x
V = P x Y. What does V stand for?
a. the value of the domestic currency
b. the velocity of money
c. the virtual reality of the universe
d. the velocity of investment spending in the economy
2. Following up on question 1 above, what does Y represent?
a....

The quantity theory of money we discussed in class assumes that
the ratio of money to GDP is constant. This can be equivalently
expressed by the Fisher equation:
M ×V = P × Q
Where:
• M represents the money supply.
• V represents the velocity of money. which is the
frequency at which the average same unit of currency is used to
purchase newly domestically-produced goods and services within a
given time period. In other words, it is the...

1. Using the quantity equation, what happens to the price level
if the money supply increases by 10%, velocity is constant, and
real GDP does not change?
2. Using the quantity equation, what happens to the price level
if the money supply increases by 10%, velocity is constant, and
real GDP increases by 5%?

What are the major assumptions of Quantity Theory of Money
Write down the Equation of Exchange in terms of
quantities.
Write down the Equation of Exchange in terms of rate of
change.
If the money supply is increased by 10%, and output did not
change, what is the increase in inflation according to the Quantity
Theory of Money under the assumption of constant velocity?

1. Use the quantity theory of money equation to address the
following questions. Use the following as initial values: M = $4
trillion, V = 3, P = 1, Y = $12 trillion. (2 points) MV = PY a. All
other things being equal, by how much will nominal GDP expand if
the central bank increases the money supply to $4.2 trillion and
velocity remains constant? Show your work and explain your answer.
b. Reset your values to the initial...

4. Velocity and the quantity equation Consider a simple economy
that produces only pies. The following table contains information
on the economy's money supply, velocity of money, price level, and
output. For example, in 2014, the money supply was $240, the price
of a pie was $7.20, and the economy produced 500 pies. Fill in the
missing values in the following table, selecting the answers
closest to the values you calculate. Year Quantity of Money
Velocity of Money Price Level...

Multiple Choice please and thank you!
The velocity of money can be calculated from the quantity
equation with:
a.
PtYt Mt .
b.
PtYt .
c.
Mt .
d.
PtYt /Mt .
e.
Mt /Pt Yt
.
Using the quantity equation, if Mt = $1,000,
Pt= 1.1, and Yt = 100,000,
then the velocity of money is:
a.
9.09.
b.
100,000.
c.
0.09.
d.
0.11.
e.
110.
According to the classical dichotomy, in the long run there
is:
a.
zero...

The Federal Reserve Bank is the central bank of the United
States that performs several functions:
a
Accepts deposits from citizens
b
Controls the money supply
c
Acts as a banker for the states
d
All of the above
The average number of times each dollar is spent on final goods
and services in a year.
a
Equation of Exchange
b
Quantity Theory of Money
c
Federal Funds Rate
d
Velocity of Money
What are the tools of monetary policy?...

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