# B the average number of times each dollar is spent

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Chapter 27 / Exercise 24
Exploring Economics
Sexton
Expert Verified
B.the average number of times each dollar is spent each year.C. constant.D. inversely related to output.Velocity measures the average number of times a dollar is spent during a year.AACSB: Reflective ThinkingBLOOM'S TAXONOMY: KnowledgeDifficulty: MediumLearning Objective: 33-3Topic: Velocity of Money33-67
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Chapter 27 / Exercise 24
Exploring Economics
Sexton
Expert Verified
Chapter 33 - Inflation and the Phillips Curve49. Velocity can be calculated as the ratio of: A. nominal GDP to real GNP.B.nominal GDP to the money supply.C. real GDP to the price level.D. the money supply to the price level.Dividing nominal GDP by the money supply yields the average number of times each dollar isspent during a year, which is the definition of velocity.AACSB: Reflective ThinkingBLOOM'S TAXONOMY: KnowledgeDifficulty: MediumLearning Objective: 33-3Topic: Velocity of Money50. According to the quantity theory of money, velocity: A. varies substantially with changes in the rate of interest and the expected rate of inflation.B. varies with changes in the growth rate of the money supply.C. is fairly constant, responding only to changes in the expected rate of inflation.D.is virtually constant, responding only to changes in the underlying institutional structure.Quantity theorists believe that velocity depends only on the nature of the institutional structure that supports transactions, which changes very slowly over time, keeping velocity approximately constant.AACSB: Reflective ThinkingBLOOM'S TAXONOMY: KnowledgeDifficulty: MediumLearning Objective: 33-3Topic: Quantity Theory of Money33-68
Chapter 33 - Inflation and the Phillips Curve51. If nominal GDP is \$5 trillion and the money supply is \$1 trillion, then velocity will be: A. 1/5.B. 4.C.5.D. 6.Velocity equals nominal GDP divided by the money supply, or 5 in this case.AACSB: AnalyticBLOOM'S TAXONOMY: EvaluationDifficulty: MediumLearning Objective: 33-3Topic: Velocity of Money52. If the money supply is 500 and velocity is 6, then nominal GDP: A. is 83.33.B. is 500.C.is 3000.D. cannot be determined.Nominal GDP, PQ = MV = 500 * 6 = 3,000.AACSB: AnalyticBLOOM'S TAXONOMY: EvaluationDifficulty: MediumLearning Objective: 33-3Topic: Quantity Theory of Money53. Suppose that real output is fixed and equal to 400 while velocity is fixed and equal to 5. Then, if the money supply is equal to 200, the price level will be: A.2.5.B. 5.C. 7.5.D. 10.Use the equation of exchange (MV = PQ) to solve for P.AACSB: AnalyticBLOOM'S TAXONOMY: EvaluationDifficulty: MediumLearning Objective: 33-3Topic: Quantity Theory of Money33-69
Chapter 33 - Inflation and the Phillips Curve54. Suppose that real output is fixed and equal to 400 while velocity is fixed and equal to 5. Then, if the money supply increases from 200 to 250, the price level will: A. rise by 10 percent.B. fall by 20 percent.C.rise by 25 percent.D. rise by 50 percent.According to the quantity theory of money, if real output and velocity are constant, then changes in the price level will be proportional to changes in the money supply.