If nominal GDP equals $10 trillion and the velocity of circulation is 5, then
A) real GDP is $2 trillion.
B) the quantity of money is $50 trillion.
C) the quantity of money is $2 trillion.
D) the real value of the quantity of money is $10 trillion.
C
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The figure above represents the competitive market for slices of key lime pie. When the price is $3, the total producer surplus equals
A) $0. B) $60. C) $90. D) $120. E) None of the above answers is correct.
As a part of the tax cut package signed into law on December 17, 2010, the government reduced the employee portion of the payroll tax from 4% to 2% for 2011. According to the permanent-income hypothesis, households that smooth consumption will
A) use all of the extra income generated by this tax reduction for consumption during 2011. B) use a large portion of the extra income generated by this tax reduction for consumption during 2011. C) use most of the extra income generated by this tax reduction as saving during 2011. D) split the income evenly between consumption and saving during 2011, since the tax cut will expire after one year and consumption is smoothed.