The Quantity Theory of Money States That If the Velocity

question 57

Multiple Choice

The quantity theory of money states that if the velocity of money is stable or at least predictable,then:

• A)the quantity of money in circulation determines real GDP in the short run.
• B)the quantity of money in circulation determines aggregate spending.
• C)the quantity of money in circulation determines both real GDP and the price level in the long run.
• D)the quantity of money in circulation determines only the price level in the long run.
• E)the quantity of money in circulation determines the potential output in the long run.

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Definitions:

Liabilities

Liabilities are obligations arising from past transactions expected to lead to an outflow of resources embodying economic benefits.

Accounting Equation

Represents the foundational principle of double-entry bookkeeping, stating that assets equal liabilities plus equity, serving as the basis for all accounting systems.

Liabilities

Financial obligations or debts that a company owes to others, which are recorded on the right side of the balance sheet.

Equity

Equity represents an owner's share in the assets of a company, after all liabilities have been subtracted.