Author Question: Other things remaining the same, a decrease in inflationary expectations causes the velocity of ... (Read 101 times)

SGallaher96 · **on:** Jun 30, 2018

Other things remaining the same, a decrease in inflationary expectations causes the velocity of money to:
a. Rise.
b. Fall.
c. Not change.

Question 2

Suppose a nation reduced taxes by 20 billion. The direct change in the monetary base would be:
a. Equal to +20 billion because the government pumps new money into the economy when it lowers taxes.
b. Greater than +20 billion because the M2 money multiplier would inflate the 20 billion of new monetary base.
c. Equal to 0.
d. Equal to 20 billion times the reserve ratio on checking accounts.
e. Less than 20 billion because some of the newly created funds would leak into the system in the form of currency in circulation.