In the long run, any given percentage increase in the money supply:
A) decreases real GDP.
B) leads to an equal percentage increase in the overall price level.
C) increases real GDP.
D) leads to an equal percentage decrease in the unemployment rate.

Question

Quizplus · Accepted Answer

This is known as the quantity theory of money, which states that in the long run, a given percentage increase in the money supply leads to an equal percentage increase in the overall price level. Real GDP and unemployment rate are not affected in the long run by changes in the money supply according to the theory.

In the Long Run, Any Given Percentage Increase in the Money