What Is Meant by the Expression, "There Is Too Much

question 28

Multiple Choice

What is meant by the expression, "There is too much money chasing too few goods"?

• A) People spend too much time chasing after money.
• B) An expansion in the supply of money relative to the availability of goods and services is causing an increase in the general level of prices.
• C) The value of money will tend to decline when the supply of gold increases.
• D) People would be better off if the monetary authorities increased the supply of money more rapidly.

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Definitions:

Payback Period

The duration of time it takes for an investment to generate enough revenue to recover the initial cost of the investment.

Profitability Index

A measure used in capital budgeting to evaluate the profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.