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

Question

Quizplus · Accepted Answer

This is based on the Quantity Theory of Money, which posits 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 remain constant.

In the Long Run, a 3 Per Cent Increase in the Quantity