Consider the Money Demand Function That Takes the Form (M/P)d

question 13

Multiple Choice

Consider the money demand function that takes the form (M/P) d = kY, where M is the quantity of money, P is the price level, k is a constant, and Y is real output. If the money supply is growing at a 10 percent rate, real output is growing at a 3 percent rate, and k is constant, what is the average inflation rate in this economy?

• A)3 percent
• B)7 percent
• C)10 percent
• D)13 percent

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Definitions:

Remedy of Rescission

A legal remedy that voids a contract, returning the parties to their positions prior to the agreement, typically used in cases of misrepresentation or fraud.

Statutory Assignment

The transfer of legal rights from one party to another under the terms of a statute.

Equitable Assignment

Equitable assignment refers to a transfer of rights or benefits from one party to another that is recognized by courts of equity despite lacking the formal legal structure of a statutory assignment.

Fraudulent Misrepresentation

A false statement made knowingly, without belief in its truth, or recklessly, with intent to deceive and induce another to enter into a contract.