According to the quantity theory of money

Question

Quizplus · Accepted Answer

The quantity theory of money states that changes in the money supply will proportionally affect the price level in the long run, assuming that the velocity of money and real output remain constant. Therefore, choice A is correct. Choice B is incorrect because the quantity theory assumes that the velocity of money is relatively stable in the long run. Choice C is also incorrect because the quantity theory asserts that inflation is related to changes in the money supply. Choice D is incorrect because price level changes are explained by the quantity theory, not by Keynesian analysis.

According to the Quantity Theory of Money