The Equation of Exchange States That the Quantity of Money

question 63

Multiple Choice

The equation of exchange states that the quantity of money

• A) divided by price level equals real GDP.
• B) multiplied by nominal GDP equals the price level.
• C) divided by nominal GDP equals real GDP.
• D) multiplied by the velocity of circulation equals nominal GDP.

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Definitions:

Interest Rates

The percentage at which interest is charged or paid for the use of money, typically expressed as an annual percentage of the principal.

Corporate Taxes

Taxes imposed on the income or profit of corporations by the government.

After-tax Profits

The amount of money a company retains after all income taxes have been subtracted from its earnings.

Marginal Propensity

The ratio of the change in an economic variable (such as consumption or savings) in response to a change in another variable (such as income).