The Long-Run Link Between Money Growth and the Inflation Rate

question 6

Multiple Choice

The long-run link between money growth and the inflation rate is not precise since

• A)variations in output do not affect real money demand
• B)interest rate changes don't affect the cost of holding real money balances or the desired ratio of income to money
• C)money demand tends to shift over time as a result of financial innovation
• D)the income velocity of money has steadily declined over the last three decades
• E)all of the above

---

Definitions:

Rational Expectations

The theory suggesting that individuals form forecasts about the future based on all available information.

Critics

Individuals or groups that express disagreement or disapproval towards certain ideas, policies, or works, often seeking to present alternative viewpoints.

Great Recession

A significant global economic downturn that occurred from late 2007 through mid-2009, recognized as the most severe since the Great Depression.

Interest Rates

The expense levied by a lender on a borrower, shown as a percentage of the original amount, for asset usage.