According to the quantity theory, in the long run, an increase in the growth rate of leads to an increase in the ________.
A) the quantity of money; growth rate of real GDP
B) real GDP; inflation rate
C) real GDP; growth rate of velocity
D) the quantity of money; inflation rate

Question

Quizplus · Accepted Answer

According to the quantity theory of money, in the long run, an increase in the growth rate of the quantity of money leads to an increase in the inflation rate. This is because as the quantity of money increases, all else being equal, there is more money chasing the same amount of goods and services, which drives up prices.

According to the Quantity Theory, in the Long Run, an Increase