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4 November, 04:50

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level isA. 3.33. B. 13.33. C. 0.83. D. 1.20.

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  1. 4 November, 05:52
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    D. 1.20.

    Explanation:

    300 dollars x 4 multiplier = 1,200 dollars in the economy.

    There are 1,000 goods in the whole economy

    1,200 dollar purchase 1,000 goods

    on average: $1,200 / 1,000 units = $1.20/per unit

    with 1.20 dollar you can purchase a single good

    Notice: this means average is 1.20 dollars it do not implies all goods are worth 1.20 dollars
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