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:

Bank Reconciliation

The process of matching and comparing figures from accounting records against those shown on a bank statement to ensure consistency.

Depositor's Balance

The current amount of money held in a depositor's account at a financial institution, reflecting all transactions.

Suspected of Fraud

Being under suspicion for intentional deception to secure unfair or unlawful gain.

NSF

An abbreviation for "Non-Sufficient Funds," indicating that a bank account does not have enough money to cover a check or withdrawal.