Which of the Following Predictions Can Be Made Using the Growth

question 5

Multiple Choice

Which of the following predictions can be made using the growth rates associated with the equation of exchange, given that velocity is stable and that the economy moves to its potential output (Y_P) in the long run?

• A) If the growth rate in Y_P exceeds the money growth rate, there will be inflation.
• B) If the money growth rate is less than the growth rate in Y_P, there will be deflation.
• C) If the money supply grows at the same rate as growth in Y_P, the price level will grow at a constant rate.
• D) If the money supply grows at the same rate as growth in Y_P, the price level will also increase at the same rate as growth in Y_P.

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Definitions:

Average Operating Assets

The average value of assets used in the company's operations, calculated over a specific period to assess asset utilization efficiency.

Net Operating Income

The profit generated from a business's normal core operations, excluding deductions of taxes and interest costs.

Turnover

The rate at which inventory is sold and replaced over a particular period, or the total sales volume.

Margin

The variance between the cost at which a product is sold and the expense incurred to create it, frequently conveyed as a proportion of the revenue.