QUESTION 10

1. According to the quantity theory of money, if the money supply,M, increases by 10%, then

   	A.	velocity increases by 10%.
   	B.	the rate of inflation (in %) increases by 10.
   	C.	the nominal GDP increases by 10%.
   	D.	none of the above.

10 points   

QUESTION 11

1. According to the quantity theory of money and the classicalmodel, changes in nominal money supply, M, has

   	A.	no effect on real variables.
   	B.	no effect on inflation rate.
   	C.	no effect on nominal interest rate.
   	D.	none of the above.

10 points   

QUESTION 12

1. If the nominal interest rate is 4% while the rate of inflationis 1%, then the real interest rate is

   	A.	0%.
   	B.	1%.
   	C.	2%.
   	D.	none of the above.

10 points   

QUESTION 13

1. According to the quantity theory of money and the classicalmodel, if money supply, M, increases by 1%, then

   	A.	the real interest rate (in %) increases by 1.
   	B.	the inflation rate (in %) increases by 1.
   	C.	the nominal interest rate (in %) increases by 2.
   	D.	none of the above.

10 points   

QUESTION 14

1. The opportunity cost of holding money (demand for money) is

   	A.	real interest rate.
   	B.	nominal interest rate.
   	C.	inflation rate.
   	D.	none of the above.