A Constant Velocity of Money in the Quantity Equation Implies

question 106

Multiple Choice

A constant velocity of money in the quantity equation implies that any increase in the money supply will lead directly to:

• A) an increase in the price level.
• B) a decrease in real output.
• C) an increase in real output.
• D) a decrease in the price level.

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Definitions:

Medicare

A federal health insurance program in the United States for people aged 65 and older, as well as for some younger individuals with disabilities.

Federal Budget Deficit

The financial shortfall when the federal government's expenditures exceed its revenues in a fiscal year.

Aggregate Supply

The total supply of goods and services available to a particular market from producers at various price levels, in the context of macroeconomic analysis.

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.