Given the Strict Quantity Theory of Money, If the Quantity

question 180

Multiple Choice

Given the strict quantity theory of money, if the quantity of money were decreased by 50 percent, prices would

• A) fall by 50 percent.
• B) rise by 50 percent.
• C) increase by 100 percent.
• D) decrease by 100 percent.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to buy.

Perfectly Elastic

A situation in economic theory where the quantity demanded or supplied responds infinitely to changes in price.

Perfectly Inelastic

A situation in which the demand for a good or service does not change in response to changes in price.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with higher elasticity indicating greater responsiveness.