Other Things Remaining the Same, If the Quantity of Money

question 30

Multiple Choice

Other things remaining the same, if the quantity of money increases by a given percentage, then in the long run the_{--------------------} by the same percentage.

• A)real interest rate rises
• B)price level rises
• C)real interest rate falls
• D)nominal interest rate falls
• E)price level falls

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Definitions:

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, consequently, the purchasing power of currency is falling.

Borrowers

Individuals or entities that take out loans from financial institutions or other sources, committing to repay them over a specified period, often with interest.

Lenders

Individuals, organizations, or institutions that provide funds to borrowers under the agreement that the funds will be repaid with interest at a later date.

Fixed Incomes

Financial incomes that are set at a particular figure and do not fluctuate in the short term, such as bonds or pensions.