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)ptimes quantity equals nominal output.

Question

Quizplus · Accepted Answer

The quantity theory of money assumes that the velocity of money is constant, which allows the equation of exchange (MV = PQ) to be used to predict the effects of changes in the money supply on nominal output.

One Assumption That Changes the Equation of Exchange into the Quantity