The proposition that in the long run when real GDP equals potential GDP, an increase in the quantity of money leads to an equal percentage increase in the price level is the called the quantity theory of
A) constant velocity.
B) inflation.
C) money.
D) equal change.
E) the long run.

Question

Quizplus · Accepted Answer

The proposition described in the question is known as the quantity theory of money, which asserts that in the long run, the quantity of money in circulation is directly proportional to the price level. In other words, if the money supply grows faster than output in the long run, the result is inflation. Therefore, the answer is choice C) money.

The Proposition That in the Long Run When Real GDP