In 2008 and 2009, the Quantity Theory of Money Did

question 192

Multiple Choice

In 2008 and 2009, the quantity theory of money did a ________ job of predicting year-to-year changes in the inflation rate because ________.

• A) poor; velocity of circulation plunged
• B) poor; the Fed changed the growth rate of the quantity of money too quickly
• C) good; real GDP remained stable
• D) good; interest rates behaved predictably
• E) poor; the price level and the velocity of circulation did not change

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Definitions:

Payor Bank

A bank that is responsible for paying a check or draft presented for payment against an account.

Depositary Bank

A financial institution that holds securities, such as stocks or bonds, in electronic or physical form, for investors.

Cashier's Check

A check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier.

Point-Of-Sale System

An EFT system that enables consumers to directly transfer funds from a bank account to a merchant.