When Real GDP Equals Potential GDP, the Quantity Theory of Money

question 37

Multiple Choice

When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage

• A) increase in the price level.
• B) increase in real GDP.
• C) decrease in the price level.
• D) decrease in velocity.
• E) decrease in real GDP.

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Definitions:

Finished Goods Account

An inventory account that holds the value of products that are completed and ready for sale.

Controlling Account

A general ledger account that summarizes the total balances of several subsidiary accounts, facilitating the organization and tracking of financial information.

Direct Labor Costs

The total cost of labor that is directly involved in the production of goods or services, which can be easily traced to the product.

Factory Overhead

Indirect costs associated with manufacturing, such as utilities, maintenance, and management salaries, which cannot be directly traced to specific units produced.