If the price level is 2, real GDP is $50 billion, and the quantity of money is $4 billion, then velocity is
A) 8. B) 4. C) 10. D) 25. E) 12.5.
D
You might also like to view...
Suppose you own a stock portfolio composed of shares in firms that are part of the financial services industry. You don't work - all you do is plan your consumption now and when you retire, and the only asset you have is your stock portfolio. In this problem, model your decisions in a graph with "consumption now" on the horizontal axis and "consumption at retirement" on the vertical. Throughout, assume that the long run rate of return of investment is r over the period from now to retirement. a. Graph your initial budget constraint - and indicate where in your graph your endowment point lies as well as what the slope of the budget constraint is. b. This morning, you woke up to find that the current financial crisis has wiped out some of the firms in your stock portfolio. As a result,
your portfolio is only worth half of what it was yesterday. Assuming that the long run rate of return r remains unchanged, what has just happened to your budget constraint? c. Assuming that consumption now and in the future is always a normal good, will you cut down on your consumption plans now? d. Now suppose I offer you a deal: I will give you enough cash to raise your current (financial) wealth back to what it was yesterday, but in exchange you agree to give me half of any return in your investments when you retire. You carefully analyze the deal and calculate that, under this deal, you could in fact just afford to consume the same bundle (but not strictly more) as you would without the deal. Will you accept the deal? e. Does your answer to (d) depend on our assumption that consumption is always a normal good? f. Can you tell whether, if you accept the deal, you will consume more than you otherwise would have? What does your answer depend on? g. Can you tell whether, if you accept the deal, you consume more now than you had planned yesterday before the financial crisis wiped out half your wealth? What does your answer depend on? What will be an ideal response?
Which of the following would definitely not be included in the measurement of GDP?
A) value of the services of a painter who paints your garage B) value of the services of a person who mows his or her own lawn C) value of the services of a maid who cleans your house D) value of the services of a plumber who fixes your kitchen sink
Reducing taxes on capital gains is an example of a supply-side tax cut.
Answer the following statement true (T) or false (F)
Which of the following would be included in M2, but not included in M1?
A. demand deposits B. checking accounts C. money market accounts D. none of the above