In an Economy in Which Velocity Is Constant and Real

question 181

Multiple Choice

In an economy in which velocity is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a

• A)constant price level
• B)slowly increasing price level
• C)slowly decreasing price level
• D)stable 4 percent growth in real GDP
• E)stable 4 percent growth in nominal GDP

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Definitions:

Output

The total quantity of goods or services produced by a firm, industry, or economy within a certain period.

Total Cost

The complete expenditure incurred in the production of goods or services, including fixed and variable costs.

Output

The total amount of something produced by a person, machine, or industry.

Average Variable Cost

The total variable costs (costs that change with production levels) divided by the quantity of output produced.