16) The quantity theory of inflation indicates that if the aggregate output is growing at 3% per year and the growth rate of money is 5%, then inflation is A) 8%. B) 2%. C) -2%. D) 1.6% 17) Empirical evidence shows that the quantity theory of money is a good theory of inflation A) in the long run, but not in the short run. B) in the short run, but not in the long run. C) in both the long run and the short run. D) neither the long run nor the short run. 18) The monetary transmission mechanism that links monetary policy to GDP through real interest rates and investment spending is called the A) Tobins' q theory B) wealth effects. C) traditional interest-rate channel. D) cash flow channel. I 19) According to the household liquidity effect, an expansionary monetary policy causes in the value of households' financial assets, causing consumer durable expenditure to A) decline rise B) rise, rise C) rise, fall D) decline; fall a 20) Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy. Which of the following is NOT one of these lessons? A) Rising interest rates indicate a tightening of monetary policy, whereas falling interest rates indicate an easing of monetary policy. B) Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero. C) Avoiding unanticipated fluctuations in the price level is an important objective of monetary policy, thus providing a rationale for price stability as the primary long-run goal for monetary policy. D) Other asset prices beside those on short-term debt instruments do not contain important information about the stance of monetary policy because they are important elements in various monetary policy transmission mechanisms