Suppose Velocity Is Constant at 4,real Output Is 10,and the Price

question 42

Multiple Choice

Suppose velocity is constant at 4,real output is 10,and the price level is 2.From this initial situation,the government increases the nominal money supply to 6.If velocity and output remain unchanged,by how much will the price level increase?

• A)2)4%
• B)20%
• C)24%
• D)50%

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Definitions:

Consumer Incomes

The total amount of income received by consumers, influencing their purchasing power and demand for goods and services.

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, contrasting with normal goods.

Substitute

A good or service that can be used in place of another good or service, often due to similarities in features or functions.

Expensive

Describing an item or service that has a high cost or price relative to its perceived value or compared to other options.