CFA Practice Question

CFA Practice Question

Based on historical data and assuming less-than-full employment, periods of sharp acceleration in the growth rate of the money supply tend to be associated initially with:
A. periods of economic recession.
B. a rapid growth in gross domestic product.
C. an increase in the velocity of money.
Explanation: At less-than-full employment, an expected increase in the growth rate of the money supply will initially reduce the real rate of interest, increasing the demand for goods and services.

User Contributed Comments 3

User Comment
jpducros MoVe is the PrioritY => M.V = P.Y = GDP
Kashi2010 Associated INITIALLY with..!

Such periods are associated with recession - the expected rapid growth in money supply is a stimulatory response that will likely CAUSE rapid growth, but such a period is INITIALLY associated with a recession.
enetis yea Kashi, I made the same mistake. I assumed that b/c they stated "initially," it meant recession.
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