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:

Making Profits

The process of generating financial gain from business activities after subtracting all expenses, taxes, and costs.

Gaining Prestige

The process of acquiring respect, honor, or recognition from others within a social group.

Marginal Geographical Areas

Areas located at the periphery or edge of regions, often characterized by less favorable conditions for human habitation or agriculture.

Potlatch

On the northwestern coast of North America, a ceremonial event in which a village chief publicly gives away stockpiled food and other goods that signify wealth.