The implications of the quantity theory of money are the main basis for which of the following quotes?
A) "Inflation is always zero in the long run."
B) "Inflation is always and everywhere a fiscal phenomenon."
C) "Inflation is always and everywhere a monetary phenomenon."
D) "Velocity growth should be equal to 2 percent in the long run."
E) "Velocity is always constant."

Question

Quizplus · Accepted Answer

The quantity theory of money states that the general price level of goods and services is directly proportional to the amount of money in circulation. This means that inflation is primarily caused by an increase in the money supply, making choice C the most suitable quote. Choice A is incorrect because zero inflation in the long run assumes a constant money supply, which may not be the case in reality. Choice B does not accurately reflect the effect of monetary policy on inflation, as fiscal policy may also contribute to inflation. Choices D and E are not directly related to the implications of the quantity theory of money.

The Implications of the Quantity Theory of Money Are the Main