Suppose the Money Supply Is $1,000, the Price Level Is

question 110

Multiple Choice

Suppose the money supply is $1,000, the price level is 3, and real income (or output) is $5,000.What is the velocity of money?  

• A) 0.2 
• B) 0.6 
• C) 1.67 
• D) 15

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Definitions:

Paper Currency

Money in the form of banknotes, issued by the government or central bank as legal tender.

Unlimited

Having no restrictions or boundaries in quantity or scope.

Fiat Money

Currency that a government has declared to be legal tender, but it is not backed by a physical commodity and derives its value solely from the trust that the currency will be accepted as a form of payment.

Store of Value

An asset, commodity, or currency that retains its value over time, allowing it to be saved, retrieved, and exchanged at a later time.