Suppose at Present People Hold a Quantity of Money Equal

question 7

Multiple Choice

Suppose at present people hold a quantity of money equal to 85% of nominal GDP. What happens to velocity if people wish to increase their money holdings to 80% of nominal GDP?

• A) Velocity can increase or decrease depending on people's tastes and preferences toward money.
• B) Velocity is unaffected.
• C) Velocity increases.
• D) Velocity decreases.

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Definitions:

Price Ceiling

A price ceiling is a government-imposed limit on the price that can be charged for a product or service, intended to prevent prices from rising too high.

Low-Income People

Individuals or groups who earn significantly less than the average income level in their society.

Price Ceilings

Government-imposed limits on how high a price can be charged for a product or service.

Equilibrium Price

The price at which the quantity of a good demanded by consumers matches the quantity supplied by producers, resulting in market stability.