ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$3, 000
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$4, 500
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$6, 000
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$18, 000
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$27, 000
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Detailed explanation-1: -We can apply this to the quantity equation: money supply × velocity of money = price level × real GDP. growth rate of the money supply + growth rate of the velocity of money = inflation rate + growth rate of output. We have used the fact that the growth rate of the price level is, by definition, the inflation rate.
Detailed explanation-2: -The velocity of money can be calculated as the ratio of nominal gross domestic product (GDP) to the money supply (V=PQ/M), which can be used to gauge the economy’s strength or people’s willingness to spend money.
Detailed explanation-3: -The formula for money supply is MS = (MB x MM). MB, or monetary base, is the amount of money in circulation or available to be circulated. MM is money multiplier, which is calculated by dividing 1 by the required reserve set by the Federal Reserve.
Detailed explanation-4: -The first step is to multiply the base year basket quantities by the current year prices. This provides the numerator for the price level equation, which represents the current year’s prices for the base year’s basket of goods and services. The base year basket quantities are then multiplied by the base year prices.