The More Sophisticated Version of the Quantity Theory of Money

question 9

Multiple Choice

The more sophisticated version of the quantity theory of money concludes

• A) nominal GDP is proportional to the money supply.
• B) real GDP is proportional to the money supply.
• C) the money supply should be kept constant to ensure steady growth in GDP with declining prices.
• D) investment expenditures are quantitatively more important than consumption expenditures.
• E) the circulation velocity of money is extremely volatile.

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.

Treasury Stock

Stocks that the company originally sold and then bought back, decreasing the number of shares available for trade in the public market.

Cash Dividend

A distribution of earnings made by a company to its shareholders, typically in the form of profits.

Retained Earnings

The portion of a company's profits that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business, debt reduction, or share repurchases.