According to the Quantity Theory of Money

question 177

Multiple Choice

According to the quantity theory of money:

• A) the velocity of money is highly variable.
• B) the money supply directly affects real GDP.
• C) the money supply inversely affects velocity.
• D) real GDP increases as the price level increases.
• E) P = MV/Q.

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Definitions:

Aggregate Demand

The grand sum of demands for all products and services within an economy, fixed at a standard price range during a certain time period.

Expected Inflation Rate

The expected inflation rate is the anticipated annual increase in the average price level of goods and services within an economy.

Actual Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently purchasing power is falling, measured over a particular period.

Short-run Phillips Curve

A graphical representation that shows the inverse relationship between the rate of inflation and the rate of unemployment in an economy over a short period.