The Quantity Theory of Money Begins with the Equation of Exchange

question 10

Multiple Choice

The quantity theory of money begins with the equation of exchange, MV = PY, and then adds the assumptions that

• A)velocity and the price level are independent of the quantity of money.
• B)velocity and potential GDP are independent of the quantity of money.
• C)velocity varies inversely with the interest rate, and the price level is independent of the quantity of money.
• D)potential GDP and the price level are independent of the quantity of money.
• E)potential GDP and the quantity of money are independent of the price level.

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Definitions:

Downward Communication

Messages sent from the upper levels of the organizational hierarchy to the lower levels.

Organizational Hierarchy

A structured arrangement in an organization that ranks positions in a linear or vertical manner, from lowest to highest, based on authority and responsibility.

Upper Levels

Refers to the senior ranks or higher echelons within an organizational hierarchy.

Active Listening

The practice of fully concentrating, understanding, responding, and remembering what is being said in a conversation.