Based on the Analysis of the Equation of Exchange, Irving

question 101

Multiple Choice

Based on the analysis of the equation of exchange, Irving Fisher, derived the quantity theory of money which states that:

• A)Velocity changes always offset changes in the supply of money
• B)Changes in the aggregate price level are caused solely by changes in velocity
• C)Changes in the aggregate price level are caused solely by changes in the quantity of money
• D)None of the answers given are correct

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Definitions:

Arbitrage

The practice of profiting from a price difference between two or more markets, transferring a commodity or financial instrument from a lower-priced market to a higher-priced one.

Inelastic Demand

A situation in economics where the change in the price of a good or service has little to no effect on the quantity demanded by consumers.

Total Revenue

The total amount of money a firm receives by selling goods or services.

Substitutes

Goods or services that can be used in place of each other, offering similar benefits to consumers.