According to the quantity theory of money, in the long run
A)Y/M is constant.
B)Y/P is constant.
C)M/V is constant.
D)V/M is constant.
E)M/P is constant.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, in the long run, the nominal gross domestic product (Y) is determined by the quantity of money (M) in circulation and the velocity (V) of money, while the price level (P) is a function of the ratio of the quantity of money to the real output (Y). Thus, in the long run, the equation of exchange can be expressed as M x V = P x Y. Therefore, if we assume that the real output is fixed and constant over time, then changes in the quantity of money will be reflected in changes in the price level. As a result, in the long run, the relationship between the quantity of money and the price level is direct, and M/P is constant.

According to the Quantity Theory of Money, in the Long