If Velocity Does Not Change and the Quantity of Money

question 111

Multiple Choice

If velocity does not change and the quantity of money grows at the same rate as does real GDP, then in the long run

• A)the nominal interest rate is less than the real interest rate.
• B)the inflation rate equals the growth rate of the quantity of money.
• C)the inflation rate equals zero.
• D)the nominal interest rate equals zero.
• E)the real interest rate is less than the nominal interest rate.

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Definitions:

Going Concern

An accounting principle where it's assumed that a company will continue in business for the foreseeable future without the need to cease operations or liquidate assets.

Pledged Assets

Assets that are pledged as security or collateral for a loan or obligation, ensuring the lender has a claim to the asset in case of default.

Accounts Payable

Short-term obligations or debts a company owes to its suppliers or creditors.

Note Payable

A written promise to pay a specific amount of money, often bearing interest, at a future date or on demand.