If You Believe That Velocity Is Constant and That the Aggregate

question 126

Multiple Choice

If you believe that velocity is constant and that the aggregate supply curve is horizontal, then the quantity theory of money would predict that a doubling of the money supply would cause a doubling of the

• A)price level and real output.
• B)price level.
• C)price level and no change in real output.
• D)real output.

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Definitions:

Payroll Tax

Fees levied on employers or their employees, customarily figured as a percentage of what staff are paid.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, representing the percentage of tax applied to your next dollar of taxable income.

Gross Domestic Product

The total value of all goods and services produced over a specific time period within a country's borders.

Federal Government

The national government of a federated state, which encompasses the overall governing institutions and political authority of the country.