Classical economists,who adhered to the quantity theory of money,believed that an increase in the money supply would cause
A)a proportional change in velocity.
B)a proportional change in real GDP.
C)a proportional change in prices.
D)no effect on velocity,prices,or real GDP.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the money supply will cause a proportional change in prices. This is because, in the long run, the supply of goods and services remains the same while the amount of money chasing those goods and services increases, leading to inflationary pressures. Classical economists did not believe that changes in the money supply would have any effect on real GDP or velocity (the speed at which money changes hands).

Classical Economists,who Adhered to the Quantity Theory of Money,believed That