The quantity theory of money builds on the equation of exchange. What specific assumptions are made that turn the equation of exchange from an accounting identity into an economic theory?
What will be an ideal response?
The principal assumption is that velocity is predictable enough so that change in the money supply will cause specific and predictable changes in nominal GDP. Therefore, if the economy is growing at a specific rate, an increase in the money supply of a given percentage will increase prices by the same amount and nominal GDP by the sum of the growth percentage and the money supply increase percentage. The crucial assumption is that velocity is either stable or predictable and therefore, there is a behavioral relationship between money and prices.
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Technologically efficient production plans are also economically efficient.
Answer the following statement true (T) or false (F)
Through its anti-poverty programs, the U.S. currently spends $789 billion attempting to
A. "end welfare as we know it." B. increase the median educational attainment of welfare recipients by two years. C. achieve European standards of bureaucratic efficiency. D. eliminate a "poverty gap" of only $96 billion.