Most monetarists would say that
A) the MV = PQ equation provides a better understanding of the macroeconomy than does the
$C _ { a } + I _ { g } + X _ { n } + G = \mathrm { GDP }$ = GDP equation.
B) most changes in the price level are explainable by changes in the level of real output.
C) the velocity of money is quite unstable.
D) all of these are true.

Question

Quizplus · Accepted Answer

Monetarists, who focus on the role of governments in controlling the amount of money in circulation, generally believe that the equation MV = PQ (where M is the money supply, V is the velocity of money, P is the price level, and Q is the output of goods and services) provides a better understanding of the macroeconomy. This is because they emphasize the relationship between the money supply and price levels, rather than the components of GDP (C + I + G + NX) which are the focus of other economic theories. Monetarists argue that changes in the money supply are the main cause of changes in the price level, and they consider the velocity of money to be relatively stable, not unstable as option C suggests.

Most Monetarists Would Say That A) the MV = PQ Ca+Ig+Xn+G=GDPC _ { a } + I _ { g } + X _ { n } + G = \mathrm { GDP }Ca​+Ig​+Xn​+G=GDP

Most Monetarists Would Say That
A) the MV = PQ $C _ { a } + I _ { g } + X _ { n } + G = \mathrm { GDP }$