The equation of exchange is an accounting identity that
A. relates the money supply to nominal GDP.
B. equates the demand for money with the supply of money.
C. relates the money supply to real GDP.
D. accounts use to balance assets and liabilities.
Answer: A
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An income tax for which the average tax rate decreases with income is called a
A) regressive income tax. B) proportional income tax. C) flat-rate income tax. D) progressive income tax.
Profit-maximizing extraction companies will attempt to:
A. extract resources as quickly as possible. B. delay extraction as long as possible. C. find rates of extraction that maximize the flow of profits over time. D. extract resources at a constant rate every year to minimize price fluctuations.
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
An essential function of a central bank is to:
A. manage the money supply. B. collect taxes. C. issue debt. D. control and monitor government budgets.