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Author Question: If there are 48 million people in a country's labor force, and the number of potential adult workers ... (Read 37 times)

ericka1

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on: Jun 30, 2018
If there are 48 million people in a country's labor force, and the number of potential adult workers in the country is 80 million, the labor force participation rate in the economy is:
 
  A) 90 percent. B) 60 percent. C) 48 percent. D) 80 percent.

Question 2

What is the equation of exchange? How can the equation of exchange be converted into the quantity theory of money?
 
  What will be an ideal response?


Hikerman221

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Reply #1 on: Jun 30, 2018
Answer to Question 1

B

Answer to Question 2

The equation of exchange is MSV = PY, where MS is the money supply, V is the velocity of money, and PY is the nominal GDP. It is an accounting identity, so is not a theory. The equation of exchange becomes the quantity theory of money and prices by assuming that velocity is constant and that real GDP (Y) is stable. Then we have P = (MS)V/Y or that a change in the money supply will lead only to a proportionate change in the price level.


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