The Quantity Equation Tells Us That, in the Long Run

question 69

Multiple Choice

The quantity equation tells us that, in the long run, when the economy is at potential GDP, an increase in the growth of the money supply will

• A)always increase inflation by the same amount if velocity is constant.
• B)increase inflation by a smaller amount if velocity increases.
• C)increase inflation by a larger amount if velocity decreases.
• D)always increase inflation.
• E)have no effect on inflation if velocity is constant.

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Definitions:

Sales Dollars

The total revenue generated from the sale of goods and services within a specific period.

Common Fixed Expenses

These are fixed costs that are not directly tied to production levels, such as salaries, rent, and insurance, which are shared across different segments of a business.

Break-Even

The point at which total costs and total revenues are equal, meaning that a business or product is neither making a profit nor sustaining a loss.

Sales Dollars

The total revenue generated from the sale of goods or services by a company before any expenses are deducted.