According to the Quantity Theory of Money and Prices, a 2

question 160

Multiple Choice

According to the quantity theory of money and prices, a 2 percent increase in the money supply ultimately leads to

• A) a 2 percent increase in real GDP.
• B) a 2 percent increase in wages.
• C) a 2 percent increase in the price level.
• D) a 2 percent increase in velocity.

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Definitions:

Profits

The financial gain obtained when the revenue from business activities exceeds expenses, costs, and taxes.

Retained Earnings

The portion of net income that is kept within a company rather than distributed to shareholders as dividends.

Stock Market

A marketplace where securities such as stocks and bonds are bought and sold, providing companies with access to capital and investors with a slice of ownership in companies and potential income.

Government Bonds

Debt securities issued by a government to support government spending and obligations, typically offering a fixed rate of return over a certain period.