Money and National Income Quiz

The relationship between money and national income is that money serves as a medium of exchange and a measure of value in transactions that contribute to national income. Additionally, changes in the money supply can impact national income through their effects on interest rates, investment, and consumption.

Money circulation contributes to the determination of national income by facilitating transactions and economic activities. The velocity of money, or the rate at which money circulates in the economy, influences national income. Higher velocity implies increased economic activity and potentially higher national income, while lower velocity may indicate reduced economic activity and potentially lower national income.

Changes in the money supply can impact national income by influencing interest rates, investment, and consumption. An increase in the money supply can lead to lower interest rates, higher investment, and increased consumption, potentially boosting national income. Conversely, a decrease in the money supply can have the opposite effects, potentially dampening national income.