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

question 16

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:

Presbyopia

A nearly universal change in eyesight during middle adulthood that results in some loss of near vision.

Glaucoma

A condition in which pressure in the fluid of the eye increases, either because the fluid cannot drain properly or because too much fluid is produced.

Affordances

The option that a given situation or stimulus provides.

Modalities

Different modes or methods through which something can be expressed or realized, often used in medical treatment or sensory input.