Mainstream Economists Contend That a Policy Rule Based on the Equation

question 230

Multiple Choice

Mainstream economists contend that a policy rule based on the equation of exchange breaks down because

• A) there is a tight relationship between the money supply and nominal GDP.
• B) velocity is more variable and unpredictable than expected.
• C) the money supply increases at a constant, not a variable, rate.
• D) nominal GDP is directly related to changes in the price level.

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Definitions:

Cognitive-Developmental Theory

A theory of psychological development that emphasizes the growth and changes in how people think over time, including understanding the nature of intelligence.

Social-Learning Theory

A theory that suggests people learn new behaviors through observation and imitation of others, rather than through direct experience.

Psychoanalytic Theory

A theory of personality development, originated by Sigmund Freud, which emphasizes unconscious motives and conflicts.

Observational Theory

A framework suggesting that learning occurs through observing the behaviors of others and the outcomes of those behaviors.