Figure 30-3

question 26

Multiple Choice

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
-Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS2, then

• A) when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services.
• B) when the money market is in equilibrium, one unit of goods and services sells for 33 cents.
• C) there is an excess demand for money if the value of money in terms of goods and services is 0.5.
• D) All of the above are correct.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.

Acid-test Ratio

A financial metric that assesses a company's ability to cover its short-term liabilities with its most liquid assets, excluding inventory.

Current Ratio

This ratio evaluates the ability of a business to cover its obligations due in the next year, by calculating the proportion of its current assets to its current liabilities.

Working Capital

An indicator of a company's short-term financial health, calculated as current assets minus current liabilities.