As we approached the end of the millennium, many economic crackpots advised citizens to hold large quantities of cash in anticipation of Y2K disasters. What effect would this have had on velocity if many people had been foolish enough to follow this advice?

a. It would have decreased.
b. It would have increased.
c. It would have remained constant.
d. Velocity is unrelated to cash balances.

a

Economics

You might also like to view...

The table above shows the demand for labor and supply of labor schedules for low-skilled labor. If the labor market is competitive, what is the wage rate of low-skilled labor and what is the quantity of low-skilled labor employed?

A) $6 an hour; 60 hours a day B) $6 an hour; 65 hours a day C) $4 an hour; 70 hours a day D) $4 an hour; 55 hours a day

Economics

Suppose the velocity of money is 6, the amount of money in circulation is $600 billion, the index of prices is 180, and real GDP is $20 billion. According to the strict quantity theory of money, if the money supply decreased to $300 billion,

a. the velocity of money would rise to 12. b. the index of prices would fall to 90. c. real GDP would decrease to $10 billion. d. the velocity of money would decline to 3.

Economics