In the Strict Monetarist View, a Large Increase in the Money

question 130

Multiple Choice

In the strict monetarist view, a large increase in the money supply will have:

• A) A large impact on the velocity of money and a large impact on nominal output
• B) A large impact on the velocity of money and a small impact on nominal output
• C) No effect on the velocity of money and a large impact on nominal output
• D) No effect on the velocity of money and a small impact on the nominal output

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Definitions:

Interest Rates

The cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal.

Premium

The amount by which the price of a financial instrument or insurance policy exceeds its face value or the cost above the normal price.

Modified Duration

A measure indicating the sensitivity of a bond's price to changes in interest rates, estimating the percentage price change for a parallel shift in yield curves.