The quantity theory of money says that changes in ____lead to equivalent changes in ____ but have no effect on ______?
Correct answer: C. nominal money, the price level, output and employment
- A. prices, wages, output and employment
- B. output prices, employment
- C. nominal money, the price level, output and employment
- D. nominal money output prices
Explanation
Under the quantity theory, a proportional increase in nominal money produces a proportional increase in the price level, while real output and employment remain unchanged in the classical long run. This is the monetary-neutrality result.
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