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If the summary of economic activity is such that total production is $100, total spending is $100 and total income is $100 and all of this financed with a $20 bill, what is the amount of the stock in this example?Multiple choice question.$20$120$80$100

Question

If the summary of economic activity is such that total production is 100,totalspendingis100, total spending is 100 and total income is 100andallofthisfinancedwitha100 and all of this financed with a 20 bill, what is the amount of the stock in this example?Multiple choice question.20201208080100

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Solution

The amount of the stock in this example is 20.Thisisbecausethe20. This is because the 20 bill is the only physical currency that is being used to finance all the economic activity. Even though the total production, spending, and income all add up to 100,thisisjustameasureofthevalueoftheeconomicactivity,nottheactualphysicalcurrencyincirculation.Therefore,thestock,ortheamountofmoneyincirculation,is100, this is just a measure of the value of the economic activity, not the actual physical currency in circulation. Therefore, the stock, or the amount of money in circulation, is 20.

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