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The quantity theory of money

I'm requesting assistance with the below questions in order to prepare for an exam. The course is "Macroeconomics" author: Robert J. Gordon 11th edition text.

29) In the long run, a 1% increase in real GDP tends to

a) cause a greater than 1% increase in demand for money
b) cause a leass than 1% increase in the demand for money
c) have virtually no effect on the demand for money, because the interest rate is the main determinant of the demand for money
d) cause a 1% increase in the demand for money

30) The quantity theory of money assumed

a) a rise in money supply causes a proportionate fall in velocity
b) the fraction of income people desire to hold in the form of money is a constant
c) a fall in the velocity of money causes a proportionate increase in the money supply
d) that an increase in prices causes a proportionate increases in real GDP

31) Successful activist stabilization policy presumes that

a) the timing and magnitude of the impact of AD disturbances are known, forecasted with precision
b) the timing of policy impacts of nominal GNP are known
c) the magnitude, size impacts, are known
d) All of the above

Solution Preview

29) In the long run, a 1% increase in real GDP tends to

d) cause a 1% increase in the demand for money

The quantity theory money is MV = PQ. Therefore an increase in Q (Y) results in the same increae in M, since V is assumed ...

Solution Summary

The quantity theory of money; demand for money; and activist stabilization multiple choice.

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