Exam 22: Quantity Theory, Inflation, and the Demand for Money

Methods of financing government spending are described by an expression called the government budget constraint, which states the following:

The velocity of money is

As interest rates rise, the expected absolute return of money ________, money's expected return relative to bonds ________.

In the liquidity trap, monetary policy

Keynes's theory of the demand for money is consistent with ________ movements in ________.

Explain the Keynesian theory of money demand. What motives did Keynes think determined money demand? What are the two reasons why Keynes thought velocity could not be treated as a constant?

Cutting the money supply by one-third is predicted by the quantity theory of money to cause

The quantity theory of money is a theory of how

Keynes's theory of the demand for money implies that velocity is

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

Keynes hypothesized that the speculative component of money demand was primarily determined by the level of

Because Treasury bills pay a higher return than money and have no risk

The absence of money illusion means that

Because interest rates have substantial fluctuations, the ________ theory of the demand for money indicates that velocity has substantial fluctuations as well.

If there are economies of scale in the transactions demand for money, as income increases, money demand

If the money supply is $600 and nominal income is $3,600, the velocity of money is

Tobin's model of the speculative demand for money shows that people hold money as a ________ as a way of reducing ________.

In the liquidity trap, the money demand curve

The quantity theory of inflation indicates that if the aggregate output is growing at 3% per year and the growth rate of money is 5%, then inflation is

The speculative motive for holding money is closely tied to what function of money?