According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in
A) real national income.
B) real GDP.
C) the price level.
D) the velocity of circulation.

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that a change in the quantity of money in an economy directly affects the price level when the velocity of money and real GDP remain constant. Therefore, a 10 percent increase in the quantity of money would ultimately lead to a 10 percent increase in the price level, not in real national income, real GDP, or the velocity of circulation.

According to the Quantity Theory of Money, a 10 Percent