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QUESTION 5 According to the quantity theory of money, a 10% increase in the quantity of...

QUESTION 5

  1. According to the quantity theory of money, a 10% increase in the quantity of money ultimately leads to a 10% increase in __________.

    a.

    disposable income
    b.

    real GDP
    c.

    unemployment rate
    d.

    the price level
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Answer #1

Quantity theory of money simply said that quantity of money is directly related with the price level and it is given by the following equation.

so 10% increasing quantity of money will directly increase the 10% of price level as well because both are directly related

the answer is option d

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