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

The portfolio theories of money demand state that when income (and therefore,wealth)is higher,the demand for the money asset will ________ and the demand for real money balances will be ________.

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

Keynes's liquidity preference theory indicates that the demand for money is ________ related to ________.

In a liquidity trap,monetary policy has ________ effect on aggregate spending because a change in the money supply has ________ effect on interest rates.

Financing government spending by selling bonds to the public,which pays for the bonds with currency,

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?

In the Baumol-Tobin model,given that total costs for an individual equals + ,where T0 = monthly income,b = brokerage costs,and C = amount raised from each bond transaction,derive the so-called square root rule.

In Irving Fisher's quantity theory of money,velocity was determined by

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

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

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

Tobin's model of the speculative demand for money improves on Keynes's analysis by showing that

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 ________.

If the money supply is $20 trillion and velocity is 2,then nominal GDP is

The equation of exchange states that the quantity of money multiplied by the number of times this money is spent in a given year must equal

In the liquidity trap,monetary policy

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

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

Conventional money demand functions tended to ________ money demand in the middle and late 1970s,and ________ velocity beginning in 1982.

The classical economists believed that if the quantity of money doubled