ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the level of prices.
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the interest rate.
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the availability of banking outlets.
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the availability of credit cards.
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Detailed explanation-1: -That is, demand for money is a function of nominal income (PY) and k which is proportion of nominal income held in the form of money and this proportion is determined by the rate of returns on alterative non-monetary assets such as bonds, equity consumer durables.
Detailed explanation-2: -According to the quantity theory of money, the general price level of goods and services is proportional to the money supply in an economy-assuming the level of real output is constant and the velocity of money is constant.
Detailed explanation-3: -Most economists would agree that in the long run, output-usually measured by gross domestic product (GDP)-is fixed, so any changes in the money supply only cause prices to change.
Detailed explanation-4: -An increase in the money supply ( M) without an increase in output ( Y) causes the price level to change by the same change in the money supply. In other words, output doesn’t change, but when the money supply doubles, the price level also doubles.