Suppose That the Nominal Quantity of Money Is $200 Billion

question 163

Multiple Choice

Suppose that the nominal quantity of money is $200 billion and the value of nominal GDP is $1 trillion. It must be the case that

• A) the velocity of circulation is 5.
• B) the average price paid for a "typical" good is $5.
• C) the economy is suffering from inflation.
• D) there will be a shortage of money balances in the economy.

---

Definitions:

Market Price

The immediate rate at which assets or services are traded in the open market.

Par Common Stock

The nominal or face value of a share of common stock, as stated in the corporate charter.

Fair Market

The price at which a willing buyer and seller would agree to transact in an open and unrestricted market.

Common Stock

Common stock represents equity ownership in a corporation, where shareholders are entitled to vote on corporate matters and possibly receive dividends.