Velocity is constant-the quantity theory of money explains

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Reference no: EM132064099

1. Suppose that the market federal funds rate is below the target rate. If the demand for reserves is constant, the Fed should:

A. do nothing; the Fed will allow the fed funds market to automatically adjust.

B. increase the supply of reserves.

C. lower the IOER.

D. increase the IOER.

2. If we assume that velocity is constant, the quantity theory of money explains:

A. higher inflation at higher real economic growth and constant money growth.

B. higher inflation when real economic growth exceeds money growth.

C. lower inflation when real economic growth equals money growth.

D. lower inflation at higher real economic growth and constant money growth.

Reference no: EM132064099

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