The Inflation Rate in Venezuela Has Increased Between 2005 and 2010

question 172

Multiple Choice

The inflation rate in Venezuela has increased between 2005 and 2010, rising from 14 percent per year to 31 percent per year. At the same time, the growth rate of real GDP fell from 10 percent per year to -2.6 percent per year. The quantity theory of money

• A) predicts that nominal GDP will decrease over the period.
• B) predicts that the velocity of money will decrease over the period.
• C) states that the growth rate of money must have increased over the period.
• D) states that the inflation rate over the period would average 4 percent.

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Definitions:

Congress

The national legislative body of a country, specifically in the United States, made up of the House of Representatives and the Senate.

Board of Governors

The leading body of a central bank system or other regulatory agency, responsible for setting policies and overseeing the institution's operations.

Monetary Policy

The process by which a central bank, currency board, or government manages the supply of money and interest rates to achieve economic objectives like controlling inflation, consumption, growth, and liquidity.

President's Pleasure

A legal term denoting the indefinite detention of a prisoner because the head of state has not exercised their power to limit the period of detention.