According to the quantity theory of money, in the long run
A) an increase in the quantity of money creates an increase the price level but no increase in real GDP.
B) the quantity of money in the economy will always be just the right amount.
C) an increase in the quantity of money creates an increase in the price level and in real GDP.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

The quantity theory of money 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 (inflation) but will not affect real GDP, which is determined by real factors such as technology and resources.

According to the Quantity Theory of Money, in the Long