questions 1&2 homework

Question Completion Status: QUESTION 1 1. In the Circular Flow Model households are defined as those economic units that ( a) buy products in the product markets and sell resources in the resource markets. ( b) sell products in the product markets and buy resources in the resource markets. ( q) fit the model of a typical family of two to four persons. ( dj borrow money in the credit markets for purposes of investment. QUESTION 2 MV = PQ V=2 (Quantity of Money in circulation] x (Velocity of money) = (Price) x (Real output) Velocity is equal to 2 and is constant M = $50,000 Quantity of money in circulation is $50,000 Q = 1000 Outputis equal to 1000 and the economy is at full employment P = $100 Price is equal to $100, and is variable 2. Given the above initial conditions, what will happen if the amount of money in circulation decreases to $25,000 (as a result of a collapse of the banking system]? ( a) Combination of a decrease in both price and output will yield a reduced value of output of $50,000. ( b] Price will decrease to $50 ( c) Output will decrease to 500 O d) Any one of the above is a possible result ( ") None of the above. Tick Save and Submit to save and submit. Click Save All Answers to save all answers, Save A