The quantity theory of the demand for money states that a country's money demand is proportional to:
A)the domestic interest rate.
B)the level of domestic consumption.
C)the exchange rate.
D)the money value of gross domestic product.

Question

Quizplus · Accepted Answer

The quantity theory of the demand for money suggests that the demand for money is proportional to the level of nominal income or gross domestic product (GDP) in an economy. Therefore, choice D is the best answer as it directly mentions the money value of GDP. The other choices are not directly related to the quantity theory of the demand for money.

The Quantity Theory of the Demand for Money States That