The quantity theory of money idea that velocity is ________ link between money growth and nominal GDP growth was ________ in the 1930s.
A)a stable,confirmed
B)a stable,disproved
C)an unstable,confirmed
D)an unstable,disproved

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that the velocity of money (the number of times a unit of currency is used to purchase goods and services over a given period) is stable, which means that changes in the money supply will lead to proportional changes in nominal GDP. However, this theory was disproved in the 1930s when the relationship between money growth and nominal GDP growth became unstable, indicating that velocity can vary significantly over time, making it difficult to predict the impact of changes in the money supply on the economy. Thus, the best choice is B, as velocity is not a stable link between money growth and nominal GDP growth.

The Quantity Theory of Money Idea That Velocity Is ________