Which of the Following Correctly Illustrates the Quantity Theory of Money

question 68

Multiple Choice

Which of the following correctly illustrates the quantity theory of money?

• A) velocity of money × price level = money supply × real GDP
• B) money supply × velocity of money = real GDP × price level
• C) (money supply - velocity of money) = (price level - real GDP)
• D) money supply/velocity of money = price level/real GDP

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Definitions:

Federal Government

A system of government where powers and responsibilities are divided between a national government and smaller administrative divisions.

TIPS

Treasury Inflation-Protected Securities (TIPS) are a form of U.S. Treasury securities designed to help investors protect against inflation, as their principal value adjusts with the inflation rate.

Treasury Bonds

Long-term government bonds issued by the U.S. Treasury, typically with a maturity of 20 to 30 years and offering periodic interest payments.

Inflation Protection

Financial strategies or instruments designed to protect investors from the erosive effect of inflation on investments and purchasing power.