What can a country increase in the long run by increasing its money growth rate?
A) the nominal wage divided by the price level
B) real output
C) real interest rates
D) the price level

Question

Quizplus · Accepted Answer

Increasing the money growth rate will lead to an increase in the price level in the long run. This is known as the quantity theory of money, where the money supply growth rate is directly proportional to the inflation rate. However, there is no direct relationship between money growth rate and real output, real interest rates or the nominal wage divided by the price level.

What Can a Country Increase in the Long Run by Increasing