Which statement about the classical money transmission mechanism is FALSE?
A) The quantity theory provides a good explanation of the short-run impact of monetary growth.
B) The quantity theory provides a good explanation of the long-run impact of monetary growth.
C) Changes in the money supply typically affect prices before equilibrium can be reestablished.
D) People typically respond to money supply changes by making more or fewer purchases of goods and services.

Question

Quizplus · Accepted Answer

The classical money transmission mechanism focuses on the long-run impact of monetary growth rather than the short-run impact. Therefore, statement A is false while statement B is true. Statements C and D are both true and are important components of the classical money transmission mechanism.

Which Statement About the Classical Money Transmission Mechanism Is FALSE