Suppose the velocity of money is 6, the amount of money in circulation is $600 billion, the index of prices is 180, and real GDP is $20 billion. According to the strict quantity theory of money, if the money supply decreased to $300 billion,

a. the velocity of money would rise to 12.
b. the index of prices would fall to 90.
c. real GDP would decrease to $10 billion.
d. the velocity of money would decline to 3.


B

Economics

You might also like to view...

The slope of a producer's production possibilities frontier represents the producer's

A) sunk costs of production. B) average costs of production. C) marginal costs of production. D) total costs of production.

Economics

Assume the cost of certain inputs used to produce artificial Christmas trees increases and, at the same time, the economy moves into a recession, causing the incomes of consumers to decrease

Which of the following will happen to the equilibrium price and quantity of artificial Christmas trees? (Assume artificial Christmas trees are normal goods.) A) Price will increase; quantity cannot be determined. B) Price will decrease; quantity cannot be determined. C) Quantity will increase; price cannot be determined. D) Quantity will decrease; price cannot be determined.

Economics

Arthur Burns and Wesley Mitchell first described business cycles as ________

A) fluctuations in consumer preferences B) fluctuations in the price of bicycles C) fluctuations in aggregate economic activity D) all of the above E) none of the above

Economics

A firm's total fixed cost equals $2,500 . The firm's average fixed cost at 1, 5, and 10 units of output, respectively, will be: a. $2,500, $2,500, and $2,500

b. $2,500, $500, and $250. c. $2,500, $12,500, and $25,000. d. $2,500, $1,250, and $250.

Economics