MB_Chapter4_ The Demand for Money

Because the quantity theory of money tells us how much money is held for a given amount of

aggregate income, it is also a theory of

• interest-rate determination.

• the demand for money.

• exchange-rate determination.

• the demand for assets

The average number of times that a dollar is spent in buying the total amount of final goods and

services produced during a given time period is known as

• gross national product.

• the spending multiplier.

• the money multiplier.

• velocity.

If the money supply is $500 and nominal income is $3,000, the velocity of money is

• 1/60.

• 1/6.

• 6.

• 60

If nominal GDP is $10 trillion, and the money supply is $2 trillion, velocity is

• 0,5

• 5

• 10

• 20

The velocity of money is defined as

• real GDP divided by the money supply.

• nominal GDP divided by the money supply.

• real GDP times the money supply.

• nominal GDP times the money supply

Irving Fisher took the view that the institutional features of the economy which affect velocity

change ________ over time so that velocity will be fairly ________ in the short run.

• rapidly; erratic

• rapidly; stable

• slowly; stable

• slowly; erratic

The classical economistsʹ conclusion that nominal income is determined by movements in the

money supply rested on their belief that ________ could be treated as ________ in the short run.

• velocity; constant

• velocity; variable

• money; constant

• money; variable

_______ quantity theory of money suggests that the demand for money is purely a function of

income and interest rates have no effect on the demand for money.

• Keynesʹs

• Fisherʹs

• Friedmanʹs

• Tobinʹs

The Keynesian theory of money demand emphasizes the importance of

• a constant velocity.

• irrational behaviour on the part of some economic agents.

• interest rates on the demand for money.

• expectations

Keynes hypothesized that the precautionary component of money demand was primarily

determined by the level of

• interest rates.

• velocity.

• income.

• stock market prices