Velocity in the Country of Nemedia Is Always Stable

question 172

Multiple Choice

Velocity in the country of Nemedia is always stable. In 2009, the money supply was $100 billion and real GDP was $300 billion. In 2010, the money supply increased by 10 percent, real GDP increased by 5 percent, and nominal GDP equalled $660 billion. By how much did the price level increase between 2009 and 2010?

• A)10 percent
• B)9.5 percent
• C)4.76 percent
• D)2.38 percent

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Definitions:

Account Analysis

A thorough review of accounting records to understand and verify the accuracy of transactions and financial statements.

Variable

A characteristic, number, or quantity that increases or decreases over time, or takes different values in different situations.

Fixed

Costs or expenses that do not change with the level of production or sales activity, such as rent or salaries.

Committed Fixed Costs

Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.