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

The reason that economists are so interested in the stability of velocity is because if the demand for money is not stable,then steady growth of the money supply

If people expect nominal interest rates to be higher in the future,the expected return to bonds ________,and the demand for money ________.

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.

Starting in 1974,the conventional M1 money demand function began to

Keynes's liquidity preference theory indicates that the demand for money is

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 early 1990s,M2 growth underwent a dramatic ________,which some researchers believe ________ be explained by traditional money demand functions.

The theory of portfolio choice indicates that higher interest rates make money ________ desirable,and the demand for real money balances ________.

Because the quantity theory of money tells us how much money is held for a given amount of aggregate income,it is also a theory of

The quantity theory of inflation indicates that the inflation rate equals

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

Empirical evidence shows that the quantity theory of money is a good theory of inflation

The theory of portfolio choice indicates that factors affecting the demand for money include

Keynes's liquidity preference theory indicates that 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

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

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?

The Keynesian demand for real balances can be expressed as

Starting in 1974,the conventional M1 money demand function began to severely ________ the demand for money.Stephen Goldfeld labeled this phenomenon "the case of the missing ________."

According to the quantity theory of money demand