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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

The money supply has risen, but total spending has declined. Is this state of affairs possible? Explain your answer.

To determine

Explain the relationship between total spending and money supply.

Explanation

The total spending is the product of money supply and velocity; this can be explained by the following example.

If, money supply increases by $400 and velocity is 3, then the total spending is 1,200(400×3)

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