If the equation for the ________ is looked on as a demand-for-money equation, then the demand for money depends on nominal income but not the interest rate.
A) real business cycle theory
B) quantity theory of money
C) Keynesian income-expenditure model
D) unanticipated inflation rate

Question

Quizplus · Accepted Answer

The quantity theory of money states that the demand for money is directly proportional to nominal income, thus nominal income is a determinant of the demand for money. The theory also posits that changes in the money supply have a proportional effect on prices, so changes in the interest rate are not a significant determinant of the demand for money in this framework.

If the Equation for the ________ Is Looked on as a Demand-For-Money