If Nominal GDP Is $848 Billion and the Velocity of Money

question 271

Multiple Choice

If nominal GDP is $848 billion and the velocity of money is 4, then the

• A) money supply is $170 billion.
• B) money supply is $212 billion.
• C) consumer price index is 340.
• D) average level of prices is $170 billion.

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Definitions:

Normal Profit

The level of profit that is just sufficient to keep an entrepreneur in business, equaling total revenues minus explicit and implicit costs.

Price System

An economic mechanism wherein prices are determined by the interaction of supply and demand, guiding the allocation of resources and distribution of goods and services.

Scarce Goods

Items that are limited in availability relative to the desires or needs of consumers.

Laissez-Faire Economy

Literally from the French: “allow [them] to do.” An economy in which individual people and firms pursue their own self-interest without any central direction or regulation.