When is a money supply increase most likely to trigger inflation, per the quantity theory of money ?
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Answer: B. The number of transaction decrease
Explanation
The quantity theory of money states that increasing the money supply triggers inflation when output transactions remain relatively constant.
Related questions
Q1. In the long run, what outcome should an expanding money supply produce according to aggregate supply and demand models ?
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Answer: D. prices to rise and output to remain unchanged
In the long run, changes in the money supply are neutral in macroeconomic models. An expanding money supply leads to higher price levels while real output remains unchanged. Output returns to its natural rate determined...
Q2. What drives comparative advantage in the Heckscher-Ohlin model ?
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Answer: C. factor endowments
The Heckscher-Ohlin model explains comparative advantage primarily through differences in national factor endowments. Countries specialize in producing goods that intensively use their relatively abundant production fact...
Q3. The law of demand dictates that when ?
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Answer: A. Price increase demand decreases
The law of demand states that an increase in price leads to lower quantity demanded. Consumers buy fewer units of a good when its price rises, assuming all else equals. Downward-sloping demand curves reflect this inverse...
Q4. How is the aggregate supply curve depicted in the simple Keynesian model ?
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Answer: C. horizontal until it reaches full capacity and then becomes vertical
The simple Keynesian model assumes a horizontal aggregate supply curve up to full employment capacity. Firms willingly supply any level of output demanded at the existing fixed price level beforehand. Once full capacity...
Q5. What action should Japan take based on the principle of absolute advantage ?
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Answer: D. There is no basis for gainful specialization and trade
Absolute advantage alone does not determine trade patterns when one country is more productive. Comparative advantage governs trade decisions rather than absolute productivity superiority alone. Without comparative cost...
Q6. According to Staffan Linder's trade theory, when is trade in manufactured goods strongest ?
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Answer: C. similar per-capita incomes
Staffan Linder proposed that international trade in manufactured goods is strongest between similar economies. Countries with similar per-capita income levels share overlapping consumer preferences and demand structures....