Using the Equation of Exchange, If Inflation Is 1

question 82

Multiple Choice

Using the equation of exchange, if inflation is 1.5%, real output grows by 3.0%, and the growth rate of money is 5.0%, the change in the velocity of money is:

• A) Zero; velocity is constant.
• B) -0.5%.
• C) +4.5%.
• D) +0.5%.

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Definitions:

Premium

An amount paid for an insurance policy or the amount by which a bond or stock sells above its face value.

Callable Bonds

Bonds that can be redeemed by the issuer before their maturity date at a predetermined call price.

Stated Dollar Amount

A specific monetary value declared or agreed upon, which is often used in financial contexts for contracts or transactions.

Par Value

The face value of a bond or the stock value stated in the corporate charter, often set at a minimal amount.