The assumption that the velocity of money and the quantity being produced is constant is held by the:
A) Keynesian school.
B) supply-side school.
C) neo-Keynesian school.
D) rational expectations school.
E) classical school.

Question

Quizplus · Accepted Answer

The assumption of constant velocity of money and constant production levels is a key aspect of the classical school of thought in economics. This school believes that the economy operates at full employment and that any disturbances in the economy will be self-correcting in the long run, thus leading to a stable equilibrium.

The Assumption That the Velocity of Money and the Quantity