Which of the following predictions can be made using the growth rates associated with the quantity equation, assuming velocity is stable?
A) If the money supply grows at a faster rate than real GDP, there will be inflation.
B) If the money supply grows at a slower rate than real GDP, there will be inflation.
C) If the money supply grows at the same rate as real GDP, the price level will be fall and there will
be deflation.
D) If the money supply grows at the same rate as real GDP, the price level will also increase at the
same rate as real GDP.
Ans: A) If the money supply grows at a faster rate than real GDP, there will be inflation.
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Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if
A) Tom trades sandwiches in exchange for eggs. B) Jerry trades sandwiches in exchange for eggs. C) they trade, no matter who trades sandwiches and who eggs. D) they don't trade.
The price controls on consumer goods during World War II led to
A. permanent surpluses. B. stable long-term prices. C. a burst of inflation when they were ended. D. increased production of consumer goods to satisfy demand.