Chapter 20: Q 16. (page 547)
Consider the portfolio choice theory of money demand. How do you think the demand for money would be affected during a hyperinflation (i.e., monthly inflation rates in excess of )?
The demand would decrease.
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In the aftermath of the financial crisis in the United States, labor mobility has decreased significantly. How, if at all, might this affect the natural rate of unemployment?
According to the portfolio theories of money demand, what are the four factors that determine money demand? What changes in these factors can increase the demand for money?
If velocity and aggregate output are reasonably constant (as the classical economists believed), what will happen to the price level when the money supply increases from trillion to trillion?
Suppose the money supply has been growing at per year, and nominal GDP, , has been growing at per year. The data are as follows (in billions of dollars):
Calculate the velocity for each year. At what rate is the velocity growing?
What three motives for holding money did Keynes consider in his liquidity preference theory of the demand for real money balances? On the basis of these motives, what variables did he think determined the demand for money?
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