The Quantity Theory of Money Is the Idea That in the Long

question 228

Multiple Choice

The quantity theory of money is the idea that in the long run

• A) the quantity of money determines real GDP.
• B) the quantity of money is determined by banks.
• C) an increase in the growth rate of the quantity of money leads to an equal increase in the inflation rate.
• D) the quantity of money serves as a good indicator of how well money functions as a store of value.

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Definitions:

Risky

Characterized by or involving uncertainty, potential danger, or financial loss.

Interest Rates

The cost of borrowing money or the return on investment, expressed as a percentage, that lenders charge borrowers over a specified period.

Values of Bonds

The worth or price of a bond, influenced by interest rates, the bond's credit quality, and the duration until maturity.

Perpetuities

A financial instrument that provides an infinite stream of identical payments.