Which of the Following Predictions Can Be Made Using the Growth

question 5

Multiple Choice

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

• A) If the growth rate in Y_P exceeds the money growth rate, there will be inflation.
• B) If the money growth rate is less than the growth rate in Y_P, there will be deflation.
• C) If the money supply grows at the same rate as growth in Y_P, the price level will grow at a constant rate.
• D) If the money supply grows at the same rate as growth in Y_P, the price level will also increase at the same rate as growth in Y_P.

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Definitions:

Glycolipids

Lipids with a carbohydrate attached, important in cell recognition and membrane structure.

Carbohydrates

Organic compounds composed of carbon, hydrogen, and oxygen, typically found in foods and used as energy sources.

Phospholipids

A class of lipids that are a major component of all cell membranes, as they can form lipid bilayers.

Bilayer

Often refers to the lipid bilayer, a thin polar membrane made of two layers of lipid molecules, forming the basic structure of cell membranes.