The Quantity Theory of Money Assumes That

question 85

Multiple Choice

The quantity theory of money assumes that

• A)velocity varies inversely with interest rates.
• B)if velocity equals six, the Fed can increase nominal GDP by 30 percent if it increases the money supply by 5 percent.
• C)changes in the money supply affect output but not prices.
• D)changes in velocity are so small that velocity can be considered constant.

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