According to the Quantity Theory of Money, If the Money

question 26

Multiple Choice

According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be

• A)12%.
• B)8%.
• C)6%.
• D)4%.
• E)2%.

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Definitions:

Beta of the Portfolio

An assessment of a portfolio's volatility or inherent risk, relative to the overall market.

Required Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put their money into it.

Risk-free Rate

The return on an investment with zero risk; typically represented by the yield on government bonds.

Risk Characteristics

Features that define the vulnerability of an investment's return, including volatility, market risk, and credit risk.