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

Keynes's theory of the demand for money is consistent with

________ quantity theory of money suggests that the demand for money is purely a function of income,and interest rates have no effect on the demand for money.

Of the three motives for holding money suggested by Keynes,which did he believe to be the most sensitive to interest rates?

The demand for money as a cushion against unexpected contingencies is called the

If initially the money supply is $1 trillion,velocity is 5,the price level is 1,and real GDP is $5 trillion,an increase in the money supply to $2 trillion

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 ________.

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

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

In the late 1990s,M2 velocity ________,suggesting a ________ normal relationship between M2 and macroeconomic variables.

The Baumol-Tobin analysis suggests that an increase in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________.

If the deficit is financed by selling bonds to the ________,the money supply will ________,causing aggregate demand to ________.

The quantity theory of money is a theory of how

Tobin's model of the speculative demand for money shows that people can reduce their ________ by ________ their asset holdings.

Financing government spending with taxes

The Baumol-Tobin analysis suggests that a decrease in the brokerage fee for buying and selling bonds will cause the demand for money to ________ and the demand for bonds to ________.

Irving Fisher took the view that the institutional features of the economy which affect velocity change ________ over time so that velocity will be fairly ________ in the short run.

The equation of exchange is

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

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?

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