According to the Quantity Theory of Money

question 1

Multiple Choice

According to the quantity theory of money,

• A) the only way the Fed can change the quantity of money without affecting the velocity of circulation is by using open market operations.
• B) a change in the discount rate changes real GDP.
• C) a decrease in the quantity of money will decrease the velocity of circulation.
• D) a decrease in the quantity of money will decrease the price level.

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Definitions:

Economic Growth

An increase in the production of economic goods and services, compared from one period of time to another.

Production

The process of combining various material inputs and immaterial inputs (plans, know-how) to make something for consumption.

Black Plague

A devastating global epidemic of bubonic plague that struck Europe and Asia in the mid-1300s, significantly reducing the world's population.

Production Possibilities Curves

A visual depiction that illustrates the highest possible mix of products and services achievable with a set amount of resources.