According to the quantity theory of money, in the long run:

A. the inflation rate is the growth rate of the money supply minus the growth rate of aggregate output.

B. the growth rate of aggregate output is the growth rate of the money supply plus the inflation rate.

C. the growth rate of aggregate output is the growth rate of velocity minus the inflation rate.

D. the inflation rate is the growth rate of velocity minus the growth rate of aggregate output.

Question

Diet Coke

Business

12 July, 20:12

According to the quantity theory of money, in the long run:

A. the inflation rate is the growth rate of the money supply minus the growth rate of aggregate output.

B. the growth rate of aggregate output is the growth rate of the money supply plus the inflation rate.

C. the growth rate of aggregate output is the growth rate of velocity minus the inflation rate.

D. the inflation rate is the growth rate of velocity minus the growth rate of aggregate output.

+3

Answers (1)

Know the Answer?

Tiny · Answer 1

option A is correct

Explanation:

option A is correct

quantity theory sate that inflation rate = money supply growth - aggregate output growth

quantity theory also stated that goods price and services price is directly dependent on total money in circulation.

calculation of money is given as

MV = PT

Where

M = sum of money in economy

V = velocity of money circulation

P = Price level in economy

T = index of physical volume.