Exam 19: Quantity Theory, inflation and the Demand for Money

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

In the Baumol-Tobin analysis of transactions demand for money,either an increase in ________ or a decrease in ________ increases money demand.

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

Keynes argued that the precautionary component of the demand for money was primarily determined by the level of people's ________,which he believed were proportional to ________.

For the classical economists,the quantity theory of money provided an explanation of movements in the price level. Changes in the price level result

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

Only when budget deficits are financed by money creation does the increased government spending lead to ________ in the ________.

The classical economists' 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.

In the Baumol-Tobin analysis of transactions demand,scale economies imply that an increase in real income increases the quantity of money demanded ________,while an increase in the price level increases the quantity of money demanded ________.

The financing of government spending by issuing debt

In the equation of exchange,the concept that provides the link between M and PY is called

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?