In any economy, the income velocity of the hoarded money (idle) by the public is equal to _____.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. zero.
The public's hoarded (idle) money has an income velocity of zero in every economy. This is thus because the frequency at which money is employed for transactions is measured by the income velocity of money. Since hoarded money isn't used for transactions, it doesn't move across the economy. By definition, the hoarded money's velocity is zero because no transactions involve it.