If the Average Level of Prices in an Economy Equals

question 204

Multiple Choice

If the average level of prices in an economy equals 100, the money supply equals $100,000, and the level of real output equals $5,000, then the velocity of money is:

• A)5.
• B)20.
• C)100.
• D)1,000.

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Definitions:

Effective Interest Method

A technique used in accounting to allocate interest expense or income over the life of a financial instrument at a constant interest rate.

Semiannually

Occurring twice a year, typically every six months.

Discount Amortized

The process of gradually reducing the discount on bonds payable over the life of the bonds as an interest expense.