Classical economists traditionally believed that:
A) there are three motives for demanding money.
B) a change in the money supply can affect real GDP.
C) the transactions demand for money influences the velocity of money.
D) the velocity of money is constant.
E) the economy does not always operate at full employment.

Question

Quizplus · Accepted Answer

Classical economists believed in the quantity theory of money, which assumes a constant velocity of money. This means that changes in the money supply only affect prices, not real GDP or employment.

Classical Economists Traditionally Believed That