Author Question: According to the Quantity Theory of Money (Chapter 3), the increase in the money supply from 39.7 ... (Read 67 times)

hubes95 · **on:** Jun 30, 2018

According to the Quantity Theory of Money (Chapter 3), the increase in the money supply from 39.7 billion in 1940 to 99.2 billion in 1945 should have fueled strong inflation. However, it did not because

(a) the World War II (194145) (WWII) economy was operating below full employment
levels of production.
(b) the WWII economy was operating at full employment levels of production.
(c) the WWII economy was operating above full employment levels of production.
(d) price controls prevented the surge in prices across the economy.

Question 2

According to the Laffer curve, an increase in marginal tax rates

a. reduces total tax revenue.
b. increases total tax revenue
c. reduces total tax revenue when marginal tax rates rise past a certain point.
d. indicates that labor supply does not respond to changes in tax rates.