The classical economists' contention that prices double when the money supply doubles is predicated on the belief that in the short run velocity is ________ and real GDP is ________.
A)constant;constant
B)constant;variable
C)variable;variable
D)variable;constant

Question

Quizplus · Accepted Answer

The classical economists' belief that prices double when the money supply doubles is based on the Quantity Theory of Money, which assumes that in the short run, the velocity of money (the rate at which money circulates in the economy) is constant and that real GDP (the total value of all goods and services produced adjusted for inflation) is also constant. This theory suggests that any change in the money supply directly affects the price level, assuming other factors remain unchanged.

The Classical Economists' Contention That Prices Double When the Money