The Quantity Theory of Money States That If the Velocity

question 57

Multiple Choice

The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

• A)the quantity of money in circulation determines real GDP in the short run.
• B)the quantity of money in circulation determines aggregate spending.
• C)the quantity of money in circulation determines both real GDP and the price level in the long run.
• D)the quantity of money in circulation determines only the price level in the long run.
• E)the quantity of money in circulation determines the potential output in the long run.

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Definitions:

Tax Increase

A raise in the amount of money that must be paid to the government based on earnings, property value, or purchases, often implemented to fund public services.

Representativeness Heuristic

A cognitive shortcut used in decision making, where the likelihood of an object belonging to a category is assessed based on how similar it is to one's conception of that category.

Conjunction Fallacy

A logical fallacy where people incorrectly judge the probability of the conjunction of two events to be more likely than the probability of a single one of those events.

Subcategory

A more specific grouping within a larger category, often distinguished by particular characteristics.