According to the Quantity Equation, If Velocity and Real GDP

question 37

Multiple Choice

According to the quantity equation, if velocity and real GDP are constant, and the Federal Reserve increases the money supply by 5 percent, then the price level:

• A)decreases by 5 percent.
• B)decreases by more than 5 percent.
• C)increases by more than 5 percent.
• D)increases by 5 percent.

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Definitions:

Technology

The use of scientific understanding for functional aims, particularly within the industrial sector.

Motorcycles

Two-wheeled vehicles powered by an engine, designed for individual or small number passenger transport.

Opportunity Cost

The value of the next best alternative foregone as the result of making a decision.

Sailboats

Sailboats are vessels propelled partly or entirely by sails and are used for navigation, racing, or recreation.