According to the classical view,
A) velocity is constant, which means changes in price will cause changes in price or quantity.
B) quantity is constant, which means changes in the money supply could cause either changes in velocity or changes in prices.
C) velocity and price are constant so that changes in the money supply causes changes in quantity.
D) velocity and quantity are constant so that changes in the money supply cause changes in prices.

Question

Quizplus · Accepted Answer

According to the classical view, velocity (the speed at which money circulates in the economy) and quantity (the amount of goods and services produced) are considered constant in the short term. Therefore, any change in the money supply is believed to directly cause changes in the price level, leading to inflation or deflation without affecting the real output or velocity.

According to the Classical View