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 results in an equal percentage increase in the price level.
C) a rise in the price level rises causes the quantity of money to increase.
D) an increase in the quantity of money increases real GDP by a smaller percentage.

Question

Quizplus · Accepted Answer

The quantity theory of money, often associated with the equation of exchange (MV = PQ), suggests that in the long run, an increase in the quantity of money in an economy will lead to a proportional increase in the price level, assuming velocity of money and real output are constant.

The Quantity Theory of Money States That in the Long