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

The Keynesian demand for real balances can be expressed as

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

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

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

Researchers at the Federal Reserve found that M2 money demand functions performed ________ in the 1980s,with M2 velocity moving ________ with the opportunity cost of holding M2.

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

If the money supply is $600 and nominal income is $3,000,the velocity of money is

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

If the government finances its spending by issuing debt to the public,the monetary base will ________ and the money supply will ________.

What factors determine the demand for money in the Baumol-Tobin analysis of transactions demand for money? How does a change in each factor affect the quantity of money demanded?

This method of financing government spending is frequently called printing money because high-powered money (the monetary base)is created in the process.

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

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 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 ________.

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

In one of the earliest studies on the link between interest rates and money demand using United States data,James Tobin concluded that the demand for money is

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

Keynes argued that when interest rates were high relative to some normal value,people would expect bond prices to ________,so the quantity of money demanded would ________.

The speculative demand for money may not exist because

If the deficit is financed by selling bonds to the ________,the money supply will ________,increasing aggregate demand,and leading to a rise in the price level.