The quantity theory of money argues that, in the long run, the percentage change in money will create an equal percentage change in
A) potential GDP.
B) velocity.
C) the price level.
D) real GDP.

Question

Quizplus · Accepted Answer

The quantity theory of money states that in the long run, the percentage change in the money supply will be reflected in an equal percentage change in the price level. This is because, in the long run, changes in the money supply do not affect real variables such as potential GDP or real GDP, but only nominal variables such as the price level. Therefore, the correct choice is C - the price level.

The Quantity Theory of Money Argues That, in the Long