The Quantity Theory of Money

question 44

Multiple Choice

The quantity theory of money

• A)is a fairly recent addition to economic theory.
• B)can explain both moderate inflation and hyperinflation.
• C)argues that inflation is caused by too little money in the economy.
• D)All of the above are correct.

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Definitions:

Marginal Product

The additional output that can be produced by adding one more unit of a specific input, keeping all other inputs constant.

Total Product

The total quantity of output produced by a firm or economy with a given amount of inputs.

Diminishing Returns

An economic principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Average Product

The output per unit of a specific factor of production, calculated by dividing total production by the quantity of the employed factor.