Using the quantity theory of money, in the long run a 3 percent increase in the quantity of money leads to a 3 percent
A)decrease in the real interest rate.
B)increase in real GDP.
C)increase in the real interest rate.
D)decrease in the price level.
E)increase in the price level.

Question

Quizplus · Accepted Answer

In the long run, according to the quantity theory of money, an increase in the money supply leads to a proportional increase in the price level, assuming velocity and real output are constant.

Using the Quantity Theory of Money, in the Long Run