Mainstream Economists Contend That the a Policy Rule Based on the Equation

question 88

Multiple Choice

Mainstream economists contend that the a policy rule based on the equation of exchange breaks down because:

• A) There is a tight relationship between the money supply and nominal GDP
• B) Velocity is more variable and unpredictable than expected
• C) The money supply increases at a constant, not a variable rate
• D) Nominal GDP is directly related to changes in the price level

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