Which of the Following Predictions Can Be Made Using the Growth

question 44

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 exceeds 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:

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A rapid flooding of low-lying areas, usually caused by intense rainfall over a short period of time.

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Duties enforced by law that require an individual or entity to act or refrain from acting in a certain way.

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An illegal termination of employment, breaching contract terms or violating statutory or common law rules protecting employees.

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The general legal principle that says no one should be allowed to do anything that tends to injure the public at large.