A correctly anticipated increase in the quantity of money
A)increases the price level and increases real GDP.
B)increases the price level with no change in real GDP.
C)does not change the price level but increases real GDP.
D)does not change the price level or real GDP.
E)does not change the price level but decreases real GDP.

Question

Quizplus · Accepted Answer

The correct anticipated increase in the quantity of money will lead to an increase in the price level as the supply of money increases. However, it will not lead to an increase in real GDP as the increase in money supply does not impact the factors of production or technology. Therefore, choice B is the correct answer as it states that an increase in the quantity of money will increase the price level with no change in real GDP.

A Correctly Anticipated Increase in the Quantity of Money