Assume That a Country's Money Velocity Remains Constant and That

question 154

Short Answer

Assume that a country's money velocity remains constant and that the rate of money growth is 4 percent. a. What is the rate of spending growth? b. If there is an increase in money growth of 1.5 percent, and consumption growth is 0.5 percent, what is the new rate of spending growth? c. Given your answer in part b, what is the long-run rate of real GDP growth at an inflation rate of 4 percent?

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Definitions:

Stock Dividend

A stock dividend is a payment made by a corporation to its shareholders in the form of additional shares, rather than paying dividends in cash, indicating investment back into the company.

Cash Dividend

A payment made by a company out of its earnings to shareholders, usually in the form of cash.

Dividends Payable

A liability indicating the amount of dividends that a company has declared to pay out to its shareholders but has not yet paid.

Dividends Declared

profits that a company's board of directors has decided to distribute to shareholders, typically in the form of cash payments or additional shares.