Asked by Asmadi Zkeri on Jul 27, 2024
Verified
The quantity theory of money implies that if output and velocity are constant, then a 50 percent increase in the money supply would lead to less than a 50 percent increase in the price level.
Quantity Theory
An economic theory which proposes that changes in the money supply will directly affect price levels in the economy over the long term.
Money Supply
The total amount of money available in an economy at a specific time, including cash, bank deposits, and other liquid assets.
Price Level
A summarial mean of present prices for goods and services in the broad economy.
- Gain an understanding of the quantity theory of money and its impact on the economy.
Verified Answer
JV
jorge velascoJul 27, 2024
Final Answer :
False
Explanation :
According to the quantity theory of money, if output and velocity are constant, then a 50 percent increase in the money supply would lead directly to a 50 percent increase in the price level, maintaining a proportional relationship between money supply and price level.
Learning Objectives
- Gain an understanding of the quantity theory of money and its impact on the economy.