Which of the following is true regarding the quantity theory of money?
I. The theory predicts that in the long run the inflation rate equals the money growth rate minus the growth rate of real GDP.
II. The theory predicts that countries with high growth rates of money will have high inflation rates.
III. The theory predicts that increases in the growth rate of velocity lowers the inflation rate.
A) I and III
B) II and III
C) I, II and III
D) I and II

Question

Quizplus · Accepted Answer

The quantity theory of money predicts that countries with high growth rates of money will have high inflation rates (II) and that in the long run the inflation rate equals the growth rate of money minus the growth rate of real GDP (I). However, the theory does not predict that increases in the growth rate of velocity lowers the inflation rate (III).

Which of the Following Is True Regarding the Quantity Theory