According to the Quantity Equation, When Velocity Is Stable, Which

question 86

Multiple Choice

According to the quantity equation, when velocity is stable, which of the following best describes the effects of an increase in the money supply?

• A) An increase in the money supply causes a proportional increase in nominal GDP but not in the price level.
• B) An increase in the money supply causes a proportional increase in the price level and real GDP.
• C) An increase in the money supply causes a proportional increase in the real GDP but not in the price level.
• D) An increase in the money supply causes a proportional increase in the price level and nominal GDP.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company.

Manufacturing

The process of converting raw materials into finished products through various methods such as assembly, machining, or chemical processing.

Raw Materials Used

The total cost of all raw materials that are consumed in the production process during a specific period.

Production

The process of combining various material inputs and immaterial inputs (plans, know-how) to make something for consumption.