In the quantity theory of money,the assumption that aggregate output is fixed is based on the view that ________.
A)wages and prices are perfectly flexible in the long run
B)the velocity of money is constant in the short run
C)the demand for real money balances is proportional to income
D)changes in the quantity of money lead to proportional changes in the price level
E)none of the above

Question

Quizplus · Accepted Answer

The assumption that aggregate output is fixed is based on the view that wages and prices are perfectly flexible in the long run. This means that any changes in the quantity of money will result in proportional changes in the price level, and not changes in output or employment.

In the Quantity Theory of Money,the Assumption That Aggregate Output