The quantity theory of money implies that a given percentage change in the money supply will cause ?
Correct answer: A. an equal percentage change in nominal DGP.
- A. an equal percentage change in nominal DGP.
- B. an equal percentage change in real GDP
- C. a larger percentage change in nominal GDP
- D. a smaller percentage change in nominal
Explanation
The quantity equation is MV = PY, so if velocity and real output are treated as fixed, a given percentage change in money produces the same percentage change in nominal GDP. Nominal GDP combines the price level and real GDP.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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