Suppose the growth rate of the money supply is 5% per year and the velocity of money is constant. In this case:
A. the difference between inflation and the real growth rate must be 5%.
B. inflation and the real growth rate must both be 5%.
C. the sum of inflation and the real growth rate must be 5%.
D. neither the inflation rate nor the real growth rate can exceed 5%.
Ans: C. the sum of inflation and the real growth rate must be 5%.
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The Keynesian macroeconomic model states that
A) changes in technology generate business cycles. B) the economy is inherently unstable and government intervention is required to maintain continued economic growth. C) fluctuations in the quantity of money are responsible for most economic recessions. D) markets work efficiently to produce the best macroeconomic outcomes. E) the economy is fairly stable.
Congress created the Federal Reserve System in 1913 as the institution delegated to administer
A) monetary policy to stabilize the economy. B) the constitutional power of Congress to "coin money and regulate the value thereof." C) collect taxes for the federal government. D) the minting of coins.