Assume That the Fed Increases the Money Supply When There

question 51

Multiple Choice

Assume that the Fed increases the money supply when there is substantial unemployment in the economy.According to the quantity theory of money, if velocity is constant, then:

• A)the price level will decrease.
• B)real GDP will decrease.
• C)nominal GDP will increase.
• D)nominal GDP will decrease.
• E)real GDP will remain constant while price level will decrease.

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