A reason that the quantity theory of money has lost favor is that:
A)money growth and inflation are no longer closely related.
B)the quantity of money is better at predicting stock prices.
C)the economy recently experienced an unexpected and deep recession.
D)the federal funds market has been taken over by the Federal Reserve bank.

Question

Quizplus · Accepted Answer

The quantity theory of money has lost favor primarily because the direct relationship between money growth and inflation, which it posits, has been observed to weaken over time. Factors such as velocity of money and changes in how economies operate have contributed to this weakened relationship, making the theory less predictive and reliable in modern economic contexts.

A Reason That the Quantity Theory of Money Has Lost