Suppose the Velocity of Circulation Increases by 4 Percent and Potential

question 218

Multiple Choice

Suppose the velocity of circulation increases by 4 percent and potential GDP grows by 3 percent. The trend inflation rate will equal zero if the quantity of money grows by

• A) 0 percent.
• B) 1 percent.
• C) 4 percent.
• D) 3 percent.

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Definitions:

Retained Earnings

Profits that a company keeps or reinvests in itself rather than distributing to shareholders as dividends.

R&D Funding

Financial investments allocated for research and development activities to innovate or improve products and services.

Established Corporations

Corporations that have been in existence for a considerable period and have a stable position in the market, often characterized by a wide customer base and significant assets.

Interest-Rate Cost-of-Funds Curve

A graphical representation showing the relationship between the interest rates on loans and the total amount of funds loaned by banks.