Changes in the money supply do not always cause predictable changes in the level of spending because

Question

Quizplus · Accepted Answer

The velocity of money, which refers to the rate at which money is exchanged in the economy, is not always constant and can fluctuate depending on various factors such as consumer behavior, the availability of credit, and changes in interest rates. As a result, changes in the money supply may not always have a predictable effect on the level of spending in the economy. While factors like inflation, employment, and saving rates can also impact spending, the variability of the velocity of money is a key reason why changes in the money supply may not always have an expected impact.

Changes in the Money Supply Do Not Always Cause Predictable