What key assumption changed the quantity equation into the quantity theory of money?
A)Wage rates were flexible.
B)Only cash,currency,and demand deposits were considered money.
C)The velocity of money was relatively stable.
D)The money supply grew at a steady rate over the long run.

Question

Quizplus · Accepted Answer

The key assumption that changed the quantity equation into the quantity theory of money is that the velocity of money was relatively stable. This assumption allows for the prediction of the effects of changes in the money supply on the economy.

What Key Assumption Changed the Quantity Equation into the Quantity