A reason that the quantity theory of money has lost favor is that:
A. the federal funds market has been taken over by the Federal Reserve bank.
B. the economy recently experienced an unexpected and deep recession.
C. the quantity of money is better at predicting stock prices.
D. money growth and inflation are no longer closely related.
Answer: D
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If the economy's resources are fully employed and prices are starting to rise, the Fed can ________ the money supply in an attempt to reduce inflationary pressure. If this action is well-calculated, output will ________
A) increase; rise B) increase; remain close to its potential level C) decrease; remain close to its potential level D) decrease; fall
When the inflation rate is zero, the
A) real interest rate is greater than the nominal interest rate. B) real interest rate is less than the nominal interest rate. C) nominal interest rate is zero. D) real interest rate equals the nominal interest rate.