Monetarists argue that
A)The velocity of money is constant.
B)Fiscal policy puts idle money balances to work,which reduces V.
C)When there is a recession,people accumulate money balances,which increases V.
D)The velocity of money increases as much as total spending falls so that MV remains constant.

Question

Quizplus · Accepted Answer

Monetarists argue that the velocity of money is relatively constant over time, meaning that changes in the money supply lead to proportional changes in nominal income. This forms the basis of the quantity theory of money, which states that MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real output.

Monetarists Argue That