Classical economists believe that:
A) velocity is not constant.
B) changes in the money supply affect real GDP.
C) the quantity of money explains prices.
D) the money supply affects velocity.

Question

Quizplus · Accepted Answer

Classical economists believe in the quantity theory of money, which states that the quantity of money in an economy determines the level of prices. This means that changes in the money supply will have a corresponding effect on the general price level, but not on real GDP, which is determined by factors such as technology, labor, and capital. Additionally, classical economists view velocity as relatively stable or predictable and not subject to significant changes in response to changes in the money supply.

Classical Economists Believe That