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

Question

Quizplus · Accepted Answer

The quantity theory of money posits that the amount of money in circulation is directly proportional to the price level in the economy. Thus, a change in the money supply is reflected in an equal percentage change in the price level, assuming velocity of money and real GDP remain constant.

The Quantity Theory of Money Argues That, in the Long