Which of the Following Statements Is FALSE

question 49

Multiple Choice

Which of the following statements is FALSE?

• A)the relationship between money growth and inflation is much looser for M1 than M2
• B)in the short run, the velocity of M2 is affected by variations in output and interest rates
• C)there is no economic rule that says that velocity must be constant in the long run
• D) in the long run, the inflation rate is always exactly equal to the growth rate of money supply
• E)higher monetary growth lowers real interest rates in the short run, but raises nominal interest rates in the long run

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Definitions:

Permanent Working Capital

Permanent Working Capital is the minimum amount of capital that a company needs to operate effectively and continuously over the long term.

Financing Current Assets

The process of obtaining funds to cover short-term operational needs such as inventory, accounts receivable, and day-to-day expenses.

Short-Term Debt

Borrowings and obligations payable within one year, often used to meet immediate financing needs or manage cash flow efficiently.

Long-Term Debt

Borrowings and financial obligations that are due for repayment in more than one year, indicating a company's leverage.