Keynesian economists argue that the velocity of money is Question 6 options: A)

Question

Keynesian economists argue that the velocity of money is

Question 6 options:

A) stable over the long term.

B) stable in both the short run and the long rum.

C) unstable and predictable.

D) unstable and unpredictable.

If the Fed follows a monetary rule, it will

Question 7 options:

A) change the money supply as needed to combat recessions.

B) have absolute control over the money supply.

C) target a rate at which they believe the money supply should grow and stick to it.

D) try to make the money supply grow at approximately twice the potential growth rate of real GDP.

Monetarists argue that changes in the money supply

Question 8 options:

A) must be adjusted frequently in response to ever-changing economic conditions.

B) stimulate aggregate demand indirectly, through changes in interest rates and investment.

C) have a direct impact on aggregate demand.

D) have little impact on the inflation rate

Explanation / Answer

Keynesian economists argue that the velocity of money is

Answer:-

A) stable over the long term.

The Velocity of money according to the Quantity theory is stable in both the long as well as the short run. It says that there is direct relationship between the prices of output and the money supply. However Keynesian Economists accepts the Quantity Theory as accurate over the long-term but not over the short term. Keynes remarks that contrary to contemporaneous thinking, velocity and output were not stable but highly variable and as such, the quantity of money was of little importance in driving prices.

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