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Economics (AS & A Level) · May / June 2025 · Paper 31 · Question 20

9708Money and banking

According to the quantity theory of money, which combination would result in the general level of prices remaining unchanged?

  1. Amoney supply remains unchanged; total number of transactions remains unchanged; velocity of circulation rises by 3%
  2. Bmoney supply rises by 3%; total number of transactions remains unchanged; velocity of circulation rises by 3%
  3. Cmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation remains unchanged
  4. Dmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation rises by 3%

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Correct answer: C. money supply rises by 3%; total number of transactions rises by 3%; velocity of circulation remains unchanged

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