Empirical evidence shows that the quantity theory of money is a good theory of inflation
A)in the long run,but not in the short run.
B)in the short run,but not in the longrun.
C)in both the long run and the short run.
D)not in either the long run nor the short run.

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that inflation depends on the growth rate of money supply relative to the growth rate of real GDP. In the long run, this theory holds true as a sustained increase in the supply of money will result in higher prices. However, in the short run, other factors such as changes in demand or supply shocks may affect prices. Therefore, empirical evidence supports the choice A as the best answer.

Empirical Evidence Shows That the Quantity Theory of Money Is