Asked by Preanna Williams on Apr 24, 2024
Verified
During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands
A) decreased.Other things the same, a decrease in velocity decreases the price level.
B) decreased.Other things the same, a decrease in velocity increases the price level.
C) increased.Other things the same, an increase in velocity decreases the price level.
D) increased.Other things the same, an increase in velocity increases the price level.
Financial Crisis
A situation where financial assets suddenly lose a large part of their nominal value, often leading to market crashes and economic downturns.
Velocity
In the context of economics, it refers to the rate at which money circulates or is exchanged in an economy over a specific period of time.
- Evaluate the quickness of money turnover by considering the quantities of money supply, money demand, and the Gross Domestic Product.
- Comprehend the concept of monetary neutrality and its relevance to economic theory and policy.
Verified Answer
CB
CRYSTAL BUTLER6 days ago
Final Answer :
A
Explanation :
Velocity of money refers to the frequency at which one unit of currency is used to purchase domestically-produced goods and services within a given time period. A decrease in velocity implies that money is changing hands less frequently, which can lead to a decrease in the price level if other factors remain constant, as less money is circulating in the economy to purchase goods and services.
Learning Objectives
- Evaluate the quickness of money turnover by considering the quantities of money supply, money demand, and the Gross Domestic Product.
- Comprehend the concept of monetary neutrality and its relevance to economic theory and policy.