Question 1

What is the equation for the quantity theory of money?

Accepted Answer

Money supply times velocity of money = price level times real GDP (Q)

Question 2

Why is the LRAS vertical?

Accepted Answer

Because changes in the money supply have no effect on real output in the long run when the economy is in equilibrium

Question 3

According to the quantity theory of money, what determines the inflation rate?

Accepted Answer

The growth rate of the money supply

5.3 Money Growth and Inflation, AP Macroeconomics Flashcards