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1. The quantity theory of money predicts that the price level: a. is relatively constant. b....

1. The quantity theory of money predicts that the price level: a. is relatively constant. b. increases with the quantity of money in the economy. c. decreases with the quantity of money in the economy. d. is difficult to predict.

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Answer #1

Quantity theory of money is MV =PY , where V and Y are constant, So any increase in the M or the money supply will directly increase the price of the goods in the market.

The answer is "B".

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