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Chapter 20: Q 3. (page 546)

If credit cards were made illegal by congressional legislation, what would happen to velocity? Explain your answer.

Short Answer

Expert verified

Velocity increases.

Step by step solution

01

Step 1. Define velocity.

The pace at which the location changes is defined as velocity.

02

Step 2. Explanation

Velocity refers to the rate at which the position changes.

The pace at which the location changes is called velocity. The displacement or position change (a vector quantity) per time ratio is the average velocity.

Velocity may increase as a result of the increased demand for money.

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Most popular questions from this chapter

How would you expect velocity to typically behave over the course of the business cycle?

Explain how the following events will affect the demand for money according to the portfolio theories of money demand:

a. The economy experiences a business cycle contraction

b. Brokerage fees decline, making bond transactions cheaper.

c. The stock market crashes. (Hint: Consider both the increase in stock price volatility following a market crash and the decrease in wealth of stockholders.)

鈥淚f nominal GDP rises, velocity must rise.鈥� Is this statement true, false, or uncertain? Explain your answer.

If velocity and aggregate output remain constant at 5and \(1,000billion, respectively, what happens to the price level if the money supply declines from \)400 billion to$300 billion?

If large budget deficits cause the public to think there will be higher inflation in the future, what is likely to happen to the short-run aggregate supply curve when budget deficits rise?
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