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Quantity of money: Economics

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Please help answer the following questions. Provide at least 200 words in the solution as well as references to go along with the solution.

What is the effect of an increase in the quantity of money? What is the difference between real variables and nominal variables? Are these variables affected by the quantity of money? If so, how?

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The answer to this problem explains the effect of an increase in the quantity of money. The explanation is given in 226 words. The references related to the answer are also included.

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Questions: What is the effect of an increase in the quantity of money? What is the difference between real variables and nominal variables? Are these variables affected by the quantity of money? If so, how?

Solution:
The effect of an increase in the quantity of money will lead to an increase in price level. The quantity theory of money says that there is a direct proportional relationship with the price level. In short, an increase in money supply will lead to inflation. For ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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