The Quantity Theory of Money States That in the Long

question 141

Multiple Choice

The quantity theory of money states that in the long run

• A) the price level will not consistently rise, it will fluctuate.
• B) an increase in the quantity of money results in an equal percentage increase in the price level.
• C) a rise in the price level rises causes the quantity of money to increase.
• D) an increase in the quantity of money increases real GDP by a smaller percentage.

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Definitions:

Wheat

A cereal grain that is a staple food globally, used for a variety of food products, including bread, pasta, and pastry, due to its versatility and nutritional value.

Surplus

An excess of supply over demand in a market, typically leading to lower prices.

Price Floor

A government or group-imposed price control that sets the minimum allowed price for a particular good or service, intended to ensure fair conditions for producers.

Market Equilibrium

The state in which market supply and demand balance each other, and as a result, prices become stable.