Asked by
Palis Pancinni
on Nov 11, 2024
Verified
The quantity theory of money states that if the velocity of money is stable or at least predictable,then:
A) the quantity of money in circulation determines real GDP in the short run.
B) the quantity of money in circulation determines aggregate spending.
C) the quantity of money in circulation determines both real GDP and the price level in the long run.
D) the quantity of money in circulation determines only the price level in the long run.
E) the quantity of money in circulation determines the potential output in the long run.
Quantity Theory of Money
This economic theory posits that the general price level of goods and services is directly proportional to the amount of money in circulation.
Velocity of Money
The rate at which money circulates in the economy, typically measured as the ratio of GDP to the money supply.
Money in Circulation
The total amount of money, including cash and coins, that is in active use and circulating within an economy.
- Master the fundamentals of the quantity theory of money and understand its linkage to inflation and nominal GDP escalation.
Verified Answer
DC
Learning Objectives
- Master the fundamentals of the quantity theory of money and understand its linkage to inflation and nominal GDP escalation.