41. In the equation of exchange, which 2 variables did classical economists assu

Question

41. In the equation of exchange, which 2 variables did classical economists assume were constant? B. Money supply and real GDP D. Real GDP and velocity of money A. Money supply and price level C. Price level and velocity of money E. Velocity of money and price level 42. In an expansionary monetary policy, which of the following is NOT a step leading towards an increase in aggregate demand? A. The purchase of government securities by the Fed causes an increase in bank reserves B. Increased bank excess reserves allows banks to make more loans C. Increased money supply allows consumption to increase D. Lower interest rates encourage additional investment 43. Which of the following is an example of commodity money? A. A $10 bill issued by the Federal Reserve Bank of New York B. A quarter minted in 1970 C. A dime minted in 1960 D. A $1,000,000 bill issued by the Federal Reserve Bank of Fort Knox 44. If the required reserve ratio were 20%, what would be the size of the money multiplier? A. 2 B.5 C. 10 D. 20 E. None of the above 45. Which of the following does NOT happen when a bank makes a loan? A. New money is created B. The bank's excess reserves decline C. The money multiplier process begins D. Bank capital increases 46. Which of the following is NOT a source of value for fiat money? A. It allows people to get around the double coincidence of wants in trade B. It is valuable in and of itself C. People believe that it has value D. It is a medium of exchange 47. Helen typically carries $100 in cash, keeps another $400 hidden in her apartment, and has an average daily balance of $500 in her checking account. Her typical expenditures are $30,000 per year. How does Helen's velocity of money compare to the overall velocity of money in the United States today? A. Helen's velocity is higher B. Helen's velocity is lower C. Helen's velocity is the same

Explanation / Answer

41)

MV =PY

Here in this equation, M =Quantity of money, V= velocity of money, P=Price level, Y= Real GDP

Classical assumes that V and Y are constant.

Hence Right answer is (D)

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