Changes in the relationship between a given monetary aggregate and the level of economic activity is believed to be partly caused by
A)slow technological change in payment methods.
B)the increased use of electronic transfers.
C)the reduction in numbers of new financial instruments and markets.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The increased use of electronic transfers can change the relationship between a given monetary aggregate and the level of economic activity. This is because electronic transfers can influence the velocity of money, which is the speed at which money changes hands in an economy. As the use of electronic transfers increases, the velocity of money may also increase, making it more difficult to predict the impact of a given monetary aggregate on economic activity. Slow technological change in payment methods and the reduction in the number of financial instruments and markets are not directly related to changes in the relationship between a monetary aggregate and economic activity.

Changes in the Relationship Between a Given Monetary Aggregate and the Level