The Quantity Theory of Money Implies That Over the Long

question 10

Multiple Choice

The quantity theory of money implies that over the long run,the inflation rate will ________.

• A) equal the velocity of money
• B) equal the nominal interest rate
• C) equal the growth rate of M2 minus the growth rate of real output
• D) equal the growth rate of M2 plus the growth rate of real output

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Definitions:

Output Growth

The increase in the amount of goods or services produced by an economy over a period.

Production Possibilities Curve

A graphical representation showing the maximum number of goods or services that can be produced in an economy given available resources and technology.

Scarce Goods

Items that are limited in availability compared to the desires of people to possess them, requiring mechanisms like pricing or rationing to distribute them.

Unlimited Wants

The economic concept that humans have infinite desires or wishes for goods and services, despite having limited resources.