Asked by robin singh on Apr 25, 2024
During the 1970s, U.S. prices rose by 7.8 percent per year and real GDP increased. Holding velocity constant and using the quantity equation, we conclude that
A) money growth must have been greater than the growth of real income.
B) money growth must have been less than the growth of real income.
C) prices fell during the 1970s.
D) output fell during the 1970s.
Quantity Equation
The quantity equation relates the quantity of money in an economy to the nominal value of economic transactions, serving as a foundation for theories on money supply and price levels.
Real Income
The income of an individual or group after taking into consideration the effects of inflation on purchasing power.
- Apply the principles of the quantity theory of money to estimate the effects of money supply changes on nominal and real GDP.
- Apprehend the theory of monetary neutrality and its pertinence to the formulation of economic theories and policies.
Learning Objectives
- Apply the principles of the quantity theory of money to estimate the effects of money supply changes on nominal and real GDP.
- Apprehend the theory of monetary neutrality and its pertinence to the formulation of economic theories and policies.