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:

Accounting Equation

The fundamental formula in accounting that states that assets equal liabilities plus equity.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing owners' claims on the business.

Assets

Resources owned by a business or individual that have economic value and can provide future benefits.

Liabilities

Financial obligations or debts owed by a business to others, including loans, accounts payable, and mortgages.