According to the Quantity Equation, If Velocity Is Constant at Two

question 57

Multiple Choice

According to the quantity equation, if velocity is constant at two and real GDP is constant at 10 000, then, if the money supply is increased from 6250 to 6500, the price level:

• A)increases to 1.25
• B)increases to 1.3
• C)increases to 1.5
• D)is constant at 1.25

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Definitions:

Goods Sold

Refers to the total quantity of products that have been sold by a business within a specific period.

Manufacturing Overhead

The total of all the indirect costs incurred during the production process, which are not directly tied to specific units of output.

Overapplied Overhead

Overapplied overhead occurs when the allocated manufacturing overhead costs are more than the actual overhead costs, indicating too much cost was assigned to products.

Manufacturing Overhead

All manufacturing costs that are not directly assignable to specific units produced, including indirect labor and materials.