The quantity theory of money predicts that in the ________, a 10 percent increase in the quantity of money leads to a 10 percent increase in ________.

Question

Quizplus · Accepted Answer

The quantity theory of money predicts that in the long run, a 10 percent increase in the quantity of money leads to a 10 percent increase in the price level. Real GDP may or may not increase depending on other factors that affect it, and velocity is not directly affected by the quantity of money, but rather by factors such as technology and consumer spending habits. The short run is not mentioned in the quantity theory of money.

The Quantity Theory of Money Predicts That in the ________