Because the quantity theory of money tells us how much money is held for a given amount of aggregate income,it is also a theory of
A)interest-rate determination.
B)the demand for money.
C)exchange-rate determination.
D)the demand for assets.

Question

Quizplus · Accepted Answer

The quantity theory of money explains the demand for money, as it shows the relationship between the amount of money in circulation and the level of aggregate income. It suggests that the demand for money depends on the level of income and the price level, and assumes that people hold money for transactional purposes. Therefore, the correct choice is B. The theory does not directly explain interest-rate determination, exchange-rate determination, or the demand for assets.

Because the Quantity Theory of Money Tells Us How Much