In the Quantity Theory of Money

question 55

Multiple Choice

In the quantity theory of money

• A)prices are rigid.
• B)both velocity of money and real output are variable.
• C)changes in the money supply cause changes in velocity of money.
• D)the velocity of money is assumed to be stable.

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Definitions:

Financial Leverage

The use of borrowed funds with a fixed cost to enhance the potential return on investment.

Bankruptcy Risk

The risk that a company will be unable to meet its financial obligations and thus may have to declare bankruptcy.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in revenue, indicating the level of fixed versus variable costs.

Financial Leverage

The use of borrowed money to increase the potential return of an investment, which also increases the risk of loss.