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© 2014 Pearson Canada Inc.$- Keynes's theory of the demand for money implies that velocity is ____.
A) not constant but fluctuates with movements in interest rates
B) not constant but fluctuates with movements in the price level
C) not constant but fluctuates with movements in the time of year
D) a constant
Answer: A
Diff: 2 Type: MC Page Ref: 534
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
1 8) Because interest rates have substantial fluctuations, the ____ theory of the demand for
money indicates that velocity has substantial fluctuations as well.
A) classical
B) Cambridge
C) liquidity preference
D) Pigouvian
Answer: C
Diff: 2 Type: MC Page Ref: 534
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Keynes's liquidity preference theory indicates that the demand for money ____.
A) is purely a function of income, and interest rates have no effect on the demand for money
B) is purely a function of interest rates, and income has no effect on the demand for money
C) is a function of both income and interest rates
D) is a function of both government spending and income
Answer: C
Diff: 2 Type: MC Page Ref: 534
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money
Keynes's model of the demand for money suggests that velocity is ____.
A) constant
B) positively related to interest rates
C) negatively related to interest rates
D) positively related to bond values
Answer: B
Diff: 2 Type: MC Page Ref: 534
Skill: Recall
Objective List: 21.2 Define the theories of the demand for money