28.1Â Â Living with Velocity 1) Keynesians argue that velocity is A) equal to the inflation rate. B) equal to one. C) negative. D) unpredictable. 2) The velocity of M2 is equal to A) M3 minus M1. B) GDP divided by M2. C) GDP multiplied by M2. D) the velocity of M1. 3) When comparing the velocity of M2 (V2), with the velocity of M1 (V1), the evidence shows that V2 has been __________ and V1 has been __________ over time. A) relatively stable; relatively stable B) relatively stable; relatively unstable C) relatively unstable; relatively stable D) relatively unstable; relatively unstable 4) When comparing the velocity of M2 (V2), with the velocity of M1 (V1), the evidence suggests that V2 has been __________ and V1 has been __________ over time. A) relatively predictable; relatively predictable B) relatively predictable; relatively unpredictable C) relatively unpredictable; relatively predictable D) relatively unpredictable; relatively unpredictable 5) It is true that __________ changes in velocity cause __________ changes in real GDP. A) small; no B) large; no C) small; large D) large; small 6) The increasing attractiveness of a variety of liquid financial assets has caused the A) velocity of M1 to rise. B) demand for M1 to rise. C) velocity of M1 to decline. D) supply of M1 to decline. 7) One of the reasons the velocity of M1 has risen over the long-run is A) increased economic uncertainty. B) growth in the money supply. C) growth in personal income. D) expanding use of credit cards. 8) As credit card usage expands in usage, the likely effect will be to A) increase the velocity of M1. B) reduce the velocity of M1. C) increase money demand. D) increase the money supply. 9) One of the reasons the velocity of M1 has risen over the long-run is A) increased economic uncertainty. B) growth in the money supply. C) new techniques of cash management by corporate treasurers. D) an increase in the demand for money. 10) Which of the following is not responsible for the post-World War II rise in M1 velocity? A) The relatively wide historical definition of M1 B) The increasing attractiveness of other categories of financial assets C) Attractive yield on financial assets other than money D) The lending of money to earn higher interest rates