Since classical economists believe that both V and Q are constants, the equation of exchange becomes a theory in which
a. the quantity of money explains prices
b. the quantity of money explains velocity
c. the quantity of money explains real GDP
d. changes in M cause changes in V
e. prices are never flexible
A
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Are sellers always able to produce a surplus of the goods they sell?
A) No, because almost all goods are scarce. B) Only if they can increase supply faster than demand increases C) Only if they can prevent new uses for the good from being developed. D) Yes, if they insist upon receiving a sufficiently high price that is above the market clearing level.
Which of the following is not an argument against inflation targeting?
A) Inflation targeting reduces the flexibility of the Fed to pursue other policy goals. B) Inflation targeting assumes that the Fed can accurately forecast future inflation rates. C) Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals. D) Inflation targeting makes monetary policy ineffective because the targets are publicly announced.