According to the Quantity Theory of Money, an Increase in GDP

question 33

Multiple Choice

According to the quantity theory of money, an increase in GDP ________ inflation, and the Phillips curve demonstrates that inflation ________ with rising GDP. This is because the quantity theory is a ________ theory of price behavior.

• A) reduces; increases; long-run
• B) raises; decreases; short-run
• C) has zero influence on; decreases; money-neutral
• D) raises; increases; short-run
• E) reduces; does not move; Keynesian

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Definitions:

Interest Rate

The part of a loan that attracts interest charges for the borrower, customarily expressed as a yearly percentage of the loan's unpaid balance.

Future Value

Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Present Value

The current worth of a future sum of money or cash flows, given a specified rate of return.

Interest Rate

The percentage of a sum of money charged for its use, indicating the cost of borrowing or the return on savings.