The quantity theory of money suggests that an 8 percent decrease in the money supply must be matched by an 8 percent increase in velocity.

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that changes in the money supply are related to changes in price levels, not velocity. Therefore, a decrease in the money supply would lead to a decrease in prices, not necessarily an increase in velocity.

The Quantity Theory of Money Suggests That an 8 Percent