Which of the following is a characteristic of the quantity theory of money?
A) It is focused on the short run.
B) It assumes that prices and interest rates are sticky.
C) It is a product of the classical school of economics.
D) It assumes money is used for both transactions and saving.

Question

Quizplus · Accepted Answer

The quantity theory of money is a product of the classical school of economics, which emphasizes the long-run relationship between money supply and inflation. It assumes that there is a direct relationship between the quantity of money in circulation and the level of prices, and that velocity of money and output are constant in the long run. It does not assume that prices and interest rates are sticky or that it is focused on the short run. The theory assumes that money is primarily used for transactions, not saving.

Which of the Following Is a Characteristic of the Quantity