According to the quantity equation of money, in the long run, an increase in the growth of the money supply willResponsesA increase inflation by the same amount if velocity is constant.increase inflation by the same amount if velocity is constant.B increase inflation by the smaller amount if velocity increases.increase inflation by the smaller amount if velocity increases.C increase inflation by the larger amount if velocity decreases.increase inflation by the larger amount if velocity decreases.D have no effect on inflation if velocity is constant.

Inflation occurs when: Select one: a. Output increases faster than the money supply. b. The quantity of money in circulation rises faster than the stock of goods and services. c. The money supply decreases and the output increases. d. The stock of goods and services increases and the quantity of money in circulation decreases.

Key ideas→ In the long run, an increase in the quantityof money leads to an equal percentageincrease in the price level→ Nominal GDP = PY→ V = PY/M→ P = M(V/Y)→ (Inflation rate) = (Money growth rate) +(Growth rate of velocity) − (Real GDPgrowth rate)

Excessive growth in money supply leads tohigh inflationGroup of answer choicesno effect to the economyhigh inflationno inflationlow inflationNext

If the inflation rate increases, the value of money _____.A.variesB.stays the sameC.increasesD.decreasesSUBMITarrow_backPREVIOUS

Suppose that the money supply increases by 20 percent. If there is no inflation, what does thequantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.)Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aIt must increase by more than 20%bIt must increase by less than 20%cIt stays the samedIt must increase by 20%