According to the Quantity Theory of Money,if the Long-Run Economic

question 68

Multiple Choice

According to the quantity theory of money,if the long-run economic growth rate is 2.5%,by how much should the Fed increase the money supply if it wants inflation to be 2%?

• A) 0.5%
• B) 1.25%
• C) 4.5%
• D) 5%

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Definitions:

Diminishing Marginal Utility

A principle in economics that posits an individual gains less satisfaction from consuming each additional unit of the same product or service.

Marginal Utility

The extra pleasure or advantage gained from using another unit of a product or service.

Consumption

The act of using goods and services by households or individuals for personal needs or to derive utility.

Marginal Utility

The added satisfaction or utility that a consumer receives from having one more unit of a good or service.