The Quantity Theory of Money Begins with the Equation of Exchange

question 2

Multiple Choice

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

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

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