Suppose the difference between the transactions velocity and the income velocity of circulation of money in an economy is 5 and the money value of total transactions is 6 times the money value of aggregate income. If the quantity of money in circulation is 1000 currency units, then the money value of aggregate income in currency units is (a) 1000 (b) 1200 (c) 1500 (d) 1800

Suppose the difference between the transactions velocity and the income velocity of circulation of money in an economy is 5 and the money value of total transactions is 6 times the money value of aggregate income. If the quantity of money in circulation is 1000 currency units, then the money value of aggregate income in currency units is (a) 1000 (b) 1200 (c) 1500 (d) 1800

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 3.6P

See similar textbooks

Similar questions

Define the velocity of the money
1. How is the demand for money related to the velocity of circulation money? Explain with example2. How is the velocity of circulation of money related to inflation? Explain with example.
Japan's central bank, the Bank of Japan, has an inflation target of -0.25% per year (or rather "Deflation Target"). According to the Quantity Theory of Money, by how much must the Bank of Japan grow the money stock in order to hit its inflation target? A) The Bank of Japan must increase the money stock by 0.25% per year. B) The Bank of Japan must decrease the money stock by 0.25% per year. C) The Bank of Japan must increase the money stock by 0.25% per month. D) The Bank of Japan must decrease the money stock by 0.25% per month.
The next Monetary Policy will take place after 50 days and discount rates are expected to increase by 50bps. In this case, the Money Market dealer should take exposure in which of the following and why? 1) 3-Months T-Bills 2) 3-Months TDR 3) 60-days TDR
(b) Assume that a country’s nominal GDP was measured at $1500 billion in a year and the volume of money (i.e. M1) circulating in the economy the same year was $400 billion. Using the equation of exchange, determine the velocity of money during the year.
30 - The demand for money, which we say just in case, depends on which of the following?A) For transaction purposesB) InvestmentC) to speculateD) IncomeE) to interest
a) If growth rate of real GDP is 8%, and velocity growth rate is 4% . If central bank targets to have 6% inflation rate ,what should be the growth rate of money supply according to equation of exchange? b) Suppose there are two villagers, Salva and Angel. Both want to borrow money from another villager named Raquel at 10% interest rate. Angel is determined to pay the loan in due time but Salva does not have that kind of intention (loan defaulter always) but does not express it to Raquel. Both of the borrowers are unknown to Raquel and she does not have much information about them. Their true intentions are totally unknown to lender Raquel.Therefore, it is quite impossible for Raquel to distinguish who might be the defaulter. Can you write down the name of this problem? Is there any possible solution to find out the right person? How?
1. Suppose a country A’s nominal GDP in 2019 is $15 trillion, and the consumer price index in 2019 is 200. A’s nominal GDP in 2018 is $10 trillion, and the price index in 2018 is 190. What is the nominal GDP growth rate, real GDP growth rate, and inflation rate in 2019? 2. Suppose an economy in which real GDP is 1000, the velocity of money is 10, and the quantity of money (M1) is 1500. How much will the price level change if the velocity of money rises to 12?(Hint: think about the equation of exchange).
the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation rate
1.All would indicate that hyperinflation exists, except a. The general population regards monetary amounts in terms of relatively stable foreign currency. b. The cumulative inflation rate over three years is approaching or exceeds 100%. c. Inflation rates have exceeded interest rates in three successive years. d. The general population prefers to keep its wealth in nonmonetary assets. 2. Purchasing power gain or loss results from a. Monetary asset only b. Monetary liability only c. Both monetary asset and monetary liability d. Nonmonetary assets and nonmonetary liability 3. During a period of deflation, an entity would have the greatest gain in general purchasing power by holding a. Cash b. Property, plant, and equipment c. Finance lease liability d. Mortgage payable
Calculate Total Potential Deposit Creation given the following information. rrr = .09 Total Deposits: $6300 Total Reserves: $4200
If nominal GDP in an economy is $1500 and the money supply is $500, what is the velocity of money? a. 333 b. 5 c. 3 d. 7500