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2 money supply and economic activity directly related

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Unformatted text preview: ey supply and economic activity directly related. Key variable is the velocity of exchange: MV = PQ. a. b. 3. 4. As households hold more money, velocity decreases. Variables affecting the amount of money held; frequency of Variables receipts, credit. receipts, Increases in Money supply leads to an increase in output. Monetarists favor steady gradual increases in money Monetarists supply supply Dr. David P. Echevarria All Rights Reserved 3 MONETARY THEORY C. Theory of Rational Expectations 1. 2. Households...
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