In the long run, an increase in the quantity of money leads to
A) an equal percentage increase in the real interest rate.
B) a smaller percentage increase in the real interest rate.
C) an equal percentage increase in the price level.
D) a smaller percentage increase in the price level.
E) no effect on the price level or on real GDP.

Question

Quizplus · Accepted Answer

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

In the Long Run, an Increase in the Quantity of Money