The Assumption of Constant Velocity in the Quantity Equation Is

question 40

Multiple Choice

The assumption of constant velocity in the quantity equation is the equivalent of the assumption of a constant:

• A) short-run aggregate supply curve.
• B) long-run aggregate supply curve.
• C) price level in the short run.
• D) demand for real balances per unit of output.

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Definitions:

Fixed Production Costs

Expenses that do not change with the level of production, such as rent for factory premises, salaries of permanent staff, and depreciation of machinery.

Inventory Cost

The total cost associated with acquiring, storing, and managing inventory, including purchase prices, storage costs, and shrinkage.

GAAP

Generally Accepted Accounting Principles; the common set of accounting principles, standards, and procedures that companies use to compile their financial statements in the US.

Cost Flow Assumption

An accounting principle that determines how costs are allocated and reported, including FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and average cost methods.