The Quantity Theory of Money Predicts That When the Economy

question 62

Multiple Choice

The quantity theory of money predicts that when the economy is at potential GDP, a 10 percent increase in the money supply results in a 10 percent

• A) increase in the inflation rate.
• B) decrease in unemployment.
• C) decrease in the inflation rate.
• D) increase in the velocity of money.
• E) increase in potential GDP.

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Definitions:

Social Security System

A government program designed to provide financial support to people in retirement, disability, or to survivors, funded through payroll taxes.

Unemployment Benefits

Payments made by the government or a private entity to individuals who are unable to find employment.

SNAP Benefits

Financial assistance provided through the Supplemental Nutrition Assistance Program to eligible low-income individuals and families for purchasing food.

Comprehensive Income

The total change in equity for a business enterprise during a period from transactions and other events from non-owner sources.