According to the Quantity Theory of Money

question 55

Multiple Choice

According to the quantity theory of money,

• A) a decrease in the quantity of money will decrease the price level.
• B) a decrease in the quantity of money will decrease the velocity of circulation.
• C) a change in the discount rate changes real GDP.
• D) the only way the Fed can change the quantity of money without affecting the velocity of circulation is by using open market operations.

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Definitions:

Journal

A detailed record where all financial transactions of a business are initially recorded before being transferred to accounts in the general ledger.

Ledger

A comprehensive collection of all the accounts of a business, where transactions are recorded in a structured and detailed manner.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, usually resulting in a net profit or loss.

Retained Earnings

The portion of net earnings not distributed to shareholders as dividends but retained by the company to be reinvested in its core business or to pay debt.