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:

Immediate Action

A prompt and direct response to a situation or problem, often to mitigate or resolve it quickly.

Buy-in

Agreement and acceptance of an idea, plan, or strategy by all involved or affected parties.

Critical Evaluator

An individual skilled in assessing situations or arguments to make well-founded judgements.

Groupthink

A mental occurrence within a group where the need for agreement or uniformity leads to a decision-making result that is illogical or not functional.