Makeright & Sons Makes All of Its Purchases on Credit;

question 4

Multiple Choice

Makeright & Sons makes all of its purchases on credit; 50% are paid in the month of purchase; 30% during the month following the purchase and 20% in the second month following the purchase.Given the following data,determine the cash paid to creditors during month three.
Month 1 2 3
Credit Purchases $80 000 $50 000 $70 000

• A)$85 000
• B)$50 000
• C)$66 000
• D)$70 000

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Definitions:

Velocity of Money

The rate at which money is exchanged in an economy, often used to measure the health and vigor of economic activity.

Price Level

A calculation of the average cost of goods and services in an economy at a set point in time.

Nominal GDP

The market value of all final goods and services produced within a country in a specific time period, measured using current prices without adjusting for inflation.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all goods and services produced within a country's borders in a specific time period, in real terms.