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:

Inflation

The speed at which the overall price level of goods and services increases, leading to a decline in buying power.

Securities

Financial instruments that represent either ownership (as in the case of equities) or a debt agreement (as in the case of bonds) with the individual or corporate entity that issues them.

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing the United States' central banking system and setting monetary policy.

Chairman

A person appointed or elected to preside over a meeting, board, or committee.