The quantity theory of money states that in the long run
A) the price level will not consistently rise, it will fluctuate.
B) an increase in the quantity of money increases real GDP by a smaller percentage.
C) a rise in the price level rises causes the quantity of money to increase.
D) an increase in the quantity of money results in an equal percentage increase in the price level.

Question

Quizplus · Accepted Answer

The quantity theory of money states that there is a direct relationship between the quantity of money in an economy and the price level. Specifically, an increase in the quantity of money leads to an equal percentage increase in the price level, assuming that other factors remain constant. This is because as there is more money in the economy, consumers will have more money to spend, and as demand for goods and services increases, so will their price. Over the long run, this relationship should hold true.

The Quantity Theory of Money States That in the Long