If the quantity theory of money holds, then in an economy, A) ...

[saliriagwu]

If the quantity theory of money holds, then in an economy,
 
  A) inflation = growth rate of money supply - growth rate of real GDP.
  B) inflation = growth rate of money supply + growth rate of real GDP.
  C) inflation = growth rate of money supply - growth rate of nominal GDP.
  D) inflation = growth rate of money supply + growth rate of nominal GDP.

Question 2

Does optimization at the margin have any advantage over optimization in levels? Explain with the help of a suitable example.
 
  What will be an ideal response?

[Pariscourtney]

Answer to Question 1

A

Answer to Question 2

Optimization at the margin is less time consuming and simpler as the decision maker can ignore everything about different alternatives that are being compared except the particular attributes that are different. For example, if two apartments are located adjacent to each other, and the only difference between them is the rent, optimization in levels would require the calculation of net benefits of each apartment by considering all costs and benefits. On the other hand, because marginal analysis only considers the differences between the two, all attributes that are common in the two apartments can be ignored and the decision maker can focus only on the attributes that are different, in this case the rent.