IFY - causes of inflation

If initially, the money supply is $3 trillion, velocity is 4, the price level is 2, and real GDP is $6 trillion, a fall in the money supply to $1 trillion

• reduces real GDP to $2.5 trillion

• causes velocity to rise to 10.

• decreases the price level to 1

• decreases the price level to 0.67

The general form of equation given by Fisher is

• PT=MV

• MV=PT

• TP=MV

• MV=TP

Both sides of the quantity theory of money identity represent ____________. 

• Nominal GDP

• Inflation

• The Money Supply

• Real GDP

A change in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?

• M, the money supply

• Y, the real GDP

• V, velocity of money

• None of the above

The quantity theory of money is expressed by the identity equation:

• MxV ≡ Y

• M ≡ PxVxY

• MxV ≡ PxY

A change in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?

• Y, the real GDP

• V, velocity of money

• M, the money supply

• None of the above

According to the quantity theory of money, what is the primary cause of inflation?

• Increase in money supply

• Decrease in money supply

• Increase in production

• Decrease in production

What does the velocity of money represent in the quantity theory of money?

• The rate at which money is printed by the government

• The frequency with which a unit of money is spent

• The total amount of money in circulation

• The amount of goods produced in an economy

If the money supply is doubled while the velocity and real GDP remain constant, what is the expected effect on the price level according to the quantity theory of money?

• Price level is halved

• Price level remains unchanged

• Price level doubles

• Price level decreases

What is happening to inflation during the peak phase?

• Increasing

• Decreasing

• Highest

• Lowest