If Nominal GDP Is $10,400 Billion, M1 Is $1,300 Billion

question 16

Multiple Choice

If nominal GDP is $10,400 billion, M1 is $1,300 billion and M2 is $5,200 billion, then

• A)the income velocity of M1 is about four times as high as the income velocity of M2
• B)the income velocity of M1 is 1/4 of the income velocity of M2
• C)the income velocity of M2 must be 1/2
• D)the price level must be 2.0
• E)none of the above

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Definitions:

Operating Working Capital

Current assets minus current liabilities, reflecting a company's efficiency and short-term financial health in its operations.

Cannibalization Effects

Refers to the reduction in sales volume, revenue, or market share of one product as a result of the introduction of a new product by the same company.

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not affect future business decisions.

Capital Budgeting

The process used by companies to evaluate and prioritize major investments or projects based on their potential to generate returns over time.