The quantity theory of money assumes that the velocity of money:
A) increases with the quantity of money in the economy.
B) decreases with the quantity of money in the economy.
C) is relatively stable.
D) is difficult to predict.

Question

Quizplus · Accepted Answer

The quantity theory of money assumes that the velocity of money is relatively stable, meaning it does not fluctuate significantly in the short run, but remains generally constant. This theory suggests that changes in the money supply will have a direct and proportional impact on price levels in the economy.

The Quantity Theory of Money Assumes That the Velocity of Money