Explain How the Following Statements Relate to the Velocity of Money

question 152

Essay

Explain how the following statements relate to the velocity of money. Assume a constant money supply.
(a) Businesses around the country decide to pay workers only once a month in order to reduce paperwork and improve efficiency.
(b) Banks around the country begin using a new check clearing system that allows checks to clear much faster than they did previously.
(c) Credit card companies and banks announce a huge promotion to increase the use of credit cards for most, if not all, purchases. This includes food, utility bills, and most other necessities.

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Definitions:

Scarcity

A fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It necessitates the need for prioritization and choice.

Economics

The social science that studies how individuals, governments, firms, and nations make choices on allocating resources to satisfy their wants and needs.

Production

The process of creating, manufacturing, or enhancing goods and services, involving the combination of resources like labor and raw materials.

Production Possibilities Frontier

The Production Possibilities Frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors.