According to institutionally-focused economists:
A)the direction of causation goes from MV to PQ.
B)the direction of causation goes from PQ to MV.
C)there is no relationship between PQ and MV because V is constant.
D)there is no relationship between PQ and MV because Q isn't constant.

Question

Quizplus · Accepted Answer

Institutionally-focused economists often argue that the direction of causation in the equation of exchange (MV = PQ) goes from PQ (price level times the quantity of goods and services produced) to MV (money supply times the velocity of money), suggesting that economic output and prices drive the money supply and its velocity, rather than the other way around. This perspective emphasizes the role of economic institutions and policies in shaping the money supply and its velocity based on the needs of the economy.

According to Institutionally-Focused Economists