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Which of the following is true about the quantity of money in the U.S. economy? (A) It is equal to the amount of cash in circulation(B)It is much greater than the amount of cash in circulation(C)It is equal to the value of the government's gold reserves(D)It is equal to the total amount of income

my answer - (B); gold reserves were abandoned by president Nixon in 1971 so (C) ruled out; not sure about others.

To determine which of the given options is true about the quantity of money in the U.S. economy, let's go through each option and understand what it represents.

(A) It is equal to the amount of cash in circulation: Cash in circulation refers to physical currency (banknotes and coins) that people use for everyday transactions. While cash is an important component of the money supply, it does not represent the entirety of the quantity of money in the economy. Therefore, option A is not correct.

(B) It is much greater than the amount of cash in circulation: This option is referring to the broader concept of the money supply, which includes not only physical cash but also various types of deposits and electronic money held by individuals and businesses. In reality, the quantity of money in the U.S. economy is indeed much greater than the amount of cash in circulation. So, option B is correct.

(C) It is equal to the value of the government's gold reserves: The quantity of money in the economy is not directly related to the value of the government's gold reserves. While gold reserves can impact a country's monetary policy and the stability of its currency, it does not determine the total quantity of money in circulation. Thus, option C is not correct.

(D) It is equal to the total amount of income: The quantity of money in the economy is not equal to the total amount of income. Although income plays a role in the money supply, it is only a portion of it. The money supply also includes other components such as savings, investments, and borrowing. Hence, option D is not correct.

In conclusion, the correct answer is (B) It is much greater than the amount of cash in circulation.

The correct answer is (B) It is much greater than the amount of cash in circulation. The quantity of money in the U.S. economy includes more than just the physical cash in circulation. It also includes various forms of bank deposits, such as checking accounts, savings accounts, and certificates of deposit (CDs), which are part of the broader money supply known as M2. The money supply is a measure of the total amount of money available in the economy for purchasing goods, services, and assets. It is larger than the amount of cash in circulation as it also takes into account the money held in bank accounts and other financial assets.