If the Velocity of the M1 Money Supply Is 4

question 204

Multiple Choice

If the velocity of the M1 money supply is 4 and nominal GDP is $200 billion,the stock of money in circulation must be

• A)$25 billion.
• B)$50 billion.
• C)$100 billion.
• D)$800 billion.

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Definitions:

Income

The money received, typically on a regular basis, for work or through investments, crucial for determining spending, saving, and investment behaviors.

Bananas

A common type of fruit that is elongated and curved, with soft flesh rich in starch covered by a rind, which may be green, yellow, or brown when ripe.

Utility Function

A mathematical representation of how a collection of goods and services maps onto a level of utility or satisfaction for an individual or household.

Marginal Rate of Substitution

The rate at which a consumer is willing to give up one good in exchange for another good while keeping their level of satisfaction unchanged.