One assumption that changes the equation of exchange into the quantity theory of money is:
A)velocity remains constant.
B)real output varies with the money supply.
C)expectations change with inflation.
D)price times quantity equals nominal output.

Question

Quizplus · Accepted Answer

The Quantity Theory of Money assumes that the velocity of money is constant. This theory posits that any change in the money supply will directly affect the price level, assuming velocity (the rate at which money circulates) and real output remain constant.

One Assumption That Changes the Equation of Exchange into the Quantity