In the Long Run, According to the Quantity Theory of Money

question 30

Multiple Choice

In the long run, according to the quantity theory of money and classical macroeconomic theory, if velocity is constant, then _____ determines real GDP and _____ determines nominal GDP.

• A)the productive capability of the economy; the money supply
• B)the money supply; the productive capability of the economy
• C)velocity; the money supply
• D)the money supply; velocity

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Definitions:

Profit Per Unit

The profit earned by a company for each unit of product sold.

Present Value

The immediate worth of a prospective sum of money or sequence of cash flows, with a defined yield rate factored in.

Market Rate Of Interest

The prevailing rate of interest observed in the marketplace for securities or loans, influenced by factors such as supply and demand, inflation, and monetary policy.

Renewable Resources

Natural resources that can be replenished naturally over time, such as solar energy, wind, and biomass.