Using the Equation of Exchange,if Real Output Increases by 5

question 2

Multiple Choice

Using the equation of exchange,if real output increases by 5 percent per year and velocity is stable,in order to keep the price level stable

• A)The interest rate must increase by 5 percent per year.
• B)Velocity must increase by 5 percent per year.
• C)The money supply must increase by 5 percent per year.

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Definitions:

Cost Structure

An outline of the types and relative proportions of fixed and variable costs that a business incurs in its operations.

Outsourced Activities

Business processes or tasks that are contracted out to an external provider, often to reduce costs, access specialized expertise, or improve efficiency.

Expensive Resources

Resources that have a high cost associated with them, either due to their scarcity, quality, or the demand for them.

Automobile Manufacturer

A company that produces and sells cars, trucks, and other vehicles to consumers worldwide.