If Real GDP Is $10 Trillion and the Velocity of Circulation

question 140

Multiple Choice

If real GDP is $10 trillion and the velocity of circulation is 2, the quantity of money

• A) is $2 trillion.
• B) is $5 trillion.
• C) is $20 trillion.
• D) cannot be determined from the information given.

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Definitions:

Allowance Account

A contra-asset account used to record adjustments to accounts receivable, reflecting the amounts expected not to be collected.

Uncollectible

Refers to accounts receivable that are considered to be uncollectable from debtors due to their inability to pay.

Credited

A term used in accounting to denote an increase in liabilities or equity accounts, or a decrease in assets or expense accounts.

Financial Assets

Assets that derive value from a contractual claim, such as cash, stocks, bonds, and bank deposits.