According to the Quantity Theory of Money, If the Money

question 7

Multiple Choice

According to the quantity theory of money, if the money supply increases by 12 percent, then in the long run, prices go:

• A)down by 12 percent.
• B)up by less than 12 percent.
• C)up by 12 percent.
• D)up by more than 12 percent.

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Definitions:

Utility Function

A mathematical expression that ranks preferences over a set of goods or outcomes, representing satisfaction or happiness derived from consumption.

Consumption

The act of using goods and services to satisfy needs and wants, which is a fundamental component of economics.

Income

The money received by an individual or business for services provided, products sold, or investments.

Interest Rate

The cost of borrowing money or the return on investment, expressed as a percentage of the principal, over a specific time period.