In an Economy in Which Real Output Grows at an Average

question 111

Multiple Choice

In an economy in which real output grows at an average rate of 3 percent per year,a 7 percent average rate of growth in the money supply would result in a(n)

• A)inflation rate of 4 percent,if velocity were constant
• B)inflation rate of -4 percent,if velocity were constant
• C)$4 increase in the price level per year
• D)$4 decrease in the price level per year
• E)change in the velocity of money

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Definitions:

Technology

The application of scientific knowledge for practical purposes, especially in industry and in the development of innovations.

Labor Productivity

A measure of economic performance that compares the amount of goods and services produced with the hours worked to produce them.

Specializing

The process of focusing effort and resources on a limited number of activities to gain efficiency and expertise.

International Trade

The exchange of goods and services between countries, allowing for greater variety and availability of products, economies of scale, and increased efficiency.