As of 2013, the outstanding U.S. currency is more than $1 trillion, which suggests that the typical U.S. citizen holds $3,600 in cash. Is this an accurate inference? Why?
A) Yes; because dividing total currency by total U.S. population roughly works out to $3,600 per person.
B) No; because criminals and foreigners hold large sums of dollars, so the average citizen holds far less.
C) No; because the average citizen probably does not have $3,600 in her checking account.
D) Yes; because the Fed rarely makes accounting mistakes when computing M1.
E) none of the above
B
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Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. Which of the following is NOT one of these lessons?
A) Rising interest rates indicate a tightening of monetary policy, whereas falling interest rates indicate an easing of monetary policy. B) Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero. C) Avoiding unanticipated fluctuations in the price level is an important objective of monetary policy, thus providing a rationale for price stability as the primary long-run goal for monetary policy. D) Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are important elements in various monetary policy transmission mechanisms.
The proposition that the amount of goods and services produced in an economy in the long run is not affected by the price level is known as the ________
A) neutrality of money B) classical dichotomy C) quantity theory of money D) Fisher effect E) none of the above