If Real GDP Grows by 3 Percent, the Velocity of Circulation

question 149

Multiple Choice

If real GDP grows by 3 percent, the velocity of circulation grows by 4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is

• A) 4 percent.
• B) 0 percent.
• C) -4 percent.
• D) 10 percent.
• E) 4 percent

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Definitions:

Pecking Order

A social hierarchy among a group, where individuals or entities are ranked relative to each other.

Luxury-Goods Spending

The expenditure on products and services that are considered high-quality, prestigious, and often more expensive than necessary.

Consumer Optimism

The tendency of consumers to hold positive expectations about the overall economy or their personal financial situation.

Tightwad

Refers to a person who is extremely unwilling to spend money; often perceived negatively.