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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